Correlation Between Cambria Micro and First Trust
Can any of the company-specific risk be diversified away by investing in both Cambria Micro and First Trust 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 Micro and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cambria Micro And and First Trust Dow, you can compare the effects of market volatilities on Cambria Micro and First Trust 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 Micro with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Micro and First Trust.
Diversification Opportunities for Cambria Micro and First Trust
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cambria and First is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Micro And and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and Cambria Micro 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 Micro And are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dow has no effect on the direction of Cambria Micro i.e., Cambria Micro and First Trust go up and down completely randomly.
Pair Corralation between Cambria Micro and First Trust
Given the investment horizon of 90 days Cambria Micro is expected to generate 1.34 times less return on investment than First Trust. But when comparing it to its historical volatility, Cambria Micro And is 1.21 times less risky than First Trust. It trades about 0.03 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,739 in First Trust Dow on November 5, 2024 and sell it today you would earn a total of 1,358 from holding First Trust Dow or generate 23.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 55.17% |
| Values | Daily Returns |
Cambria Micro And vs. First Trust Dow
Performance |
| Timeline |
| Cambria Micro And |
| First Trust Dow |
Cambria Micro and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cambria Micro and First Trust
The main advantage of trading using opposite Cambria Micro and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Micro position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Cambria Micro vs. JPMorgan Fundamental Data | Cambria Micro vs. Davis Select International | Cambria Micro vs. Dimensional ETF Trust | Cambria Micro vs. Principal Value ETF |
| First Trust vs. iShares Micro Cap ETF | First Trust vs. Invesco SP MidCap | First Trust vs. Invesco SP SmallCap | First Trust vs. First Trust Small |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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