Correlation Between Cambria Shareholder and Invesco FTSE

Can any of the company-specific risk be diversified away by investing in both Cambria Shareholder and Invesco FTSE at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cambria Shareholder and Invesco FTSE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cambria Shareholder Yield and Invesco FTSE RAFI, you can compare the effects of market volatilities on Cambria Shareholder and Invesco FTSE and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cambria Shareholder with a short position of Invesco FTSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Shareholder and Invesco FTSE.

Diversification Opportunities for Cambria Shareholder and Invesco FTSE

0.97

Correlation Coefficient

Cambria Shareholder  Invesco FTSE

Almost no diversification

The 3 months correlation between Cambria and Invesco is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Shareholder Yield and Invesco FTSE RAFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco FTSE RAFI and Cambria Shareholder is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cambria Shareholder Yield are associated (or correlated) with Invesco FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco FTSE RAFI has no effect on the direction of Cambria Shareholder i.e., Cambria Shareholder and Invesco FTSE go up and down completely randomly.

Pair Corralation between Cambria Shareholder and Invesco FTSE

Given the investment horizon of 90 days Cambria Shareholder Yield is expected to generate 0.85 times more return on investment than Invesco FTSE. However, Cambria Shareholder Yield is 1.18 times less risky than Invesco FTSE. It trades about -0.08 of its potential returns per unit of risk. Invesco FTSE RAFI is currently generating about -0.11 per unit of risk. If you would invest  6,855  in Cambria Shareholder Yield on December 26, 2024 and sell it today you would lose (349.00) from holding Cambria Shareholder Yield or give up 5.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Cambria Shareholder Yield  vs.  Invesco FTSE RAFI

Cambria Shareholder Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cambria Shareholder Yield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Cambria Shareholder is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Invesco FTSE RAFI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco FTSE RAFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Cambria Shareholder and Invesco FTSE

The main advantage of trading using opposite Cambria Shareholder and Invesco FTSE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Shareholder position performs unexpectedly, Invesco FTSE can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Invesco FTSE will offset losses from the drop in Invesco FTSE's long position.

The idea behind Cambria Shareholder Yield and Invesco FTSE RAFI pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.