Correlation Between Cambria Global and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both Cambria Global and Alpha Architect 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 Global and Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cambria Global Momentum and Alpha Architect Quantitative, you can compare the effects of market volatilities on Cambria Global and Alpha Architect 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 Global with a short position of Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Global and Alpha Architect.
Diversification Opportunities for Cambria Global and Alpha Architect
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cambria and Alpha is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Global Momentum and Alpha Architect Quantitative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Quan and Cambria Global 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 Global Momentum are associated (or correlated) with Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Quan has no effect on the direction of Cambria Global i.e., Cambria Global and Alpha Architect go up and down completely randomly.
Pair Corralation between Cambria Global and Alpha Architect
Given the investment horizon of 90 days Cambria Global is expected to generate 2.89 times less return on investment than Alpha Architect. But when comparing it to its historical volatility, Cambria Global Momentum is 1.25 times less risky than Alpha Architect. It trades about 0.06 of its potential returns per unit of risk. Alpha Architect Quantitative is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 5,832 in Alpha Architect Quantitative on September 1, 2024 and sell it today you would earn a total of 1,321 from holding Alpha Architect Quantitative or generate 22.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Cambria Global Momentum vs. Alpha Architect Quantitative
Performance |
| Timeline |
| Cambria Global Momentum |
| Alpha Architect Quan |
Cambria Global and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cambria Global and Alpha Architect
The main advantage of trading using opposite Cambria Global and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Global position performs unexpectedly, Alpha Architect 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 Alpha Architect will offset losses from the drop in Alpha Architect's long position.| Cambria Global vs. Cambria Global Asset | Cambria Global vs. Cambria Global Value | Cambria Global vs. Cambria Foreign Shareholder | Cambria Global vs. Cambria Value and |
| Alpha Architect vs. Freedom Day Dividend | Alpha Architect vs. iShares MSCI China | Alpha Architect vs. iShares Dividend and | Alpha Architect vs. SmartETFs Dividend Builder |
Check out your portfolio center.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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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