Correlation Between Cambria Tail and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Cambria Tail and ProShares UltraShort 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 Tail and ProShares UltraShort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cambria Tail Risk and ProShares UltraShort Oil, you can compare the effects of market volatilities on Cambria Tail and ProShares UltraShort 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 Tail with a short position of ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Tail and ProShares UltraShort.
Diversification Opportunities for Cambria Tail and ProShares UltraShort
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cambria and ProShares is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Tail Risk and ProShares UltraShort Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort Oil and Cambria Tail 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 Tail Risk are associated (or correlated) with ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort Oil has no effect on the direction of Cambria Tail i.e., Cambria Tail and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Cambria Tail and ProShares UltraShort
Given the investment horizon of 90 days Cambria Tail Risk is expected to generate 0.36 times more return on investment than ProShares UltraShort. However, Cambria Tail Risk is 2.77 times less risky than ProShares UltraShort. It trades about -0.1 of its potential returns per unit of risk. ProShares UltraShort Oil is currently generating about -0.31 per unit of risk. If you would invest 1,157 in Cambria Tail Risk on August 30, 2024 and sell it today you would lose (21.00) from holding Cambria Tail Risk or give up 1.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cambria Tail Risk vs. ProShares UltraShort Oil
Performance |
| Timeline |
| Cambria Tail Risk |
| ProShares UltraShort Oil |
Cambria Tail and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cambria Tail and ProShares UltraShort
The main advantage of trading using opposite Cambria Tail and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Tail position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.| Cambria Tail vs. Amplify BlackSwan Growth | Cambria Tail vs. AGFiQ Market Neutral | Cambria Tail vs. Quadratic Interest Rate | Cambria Tail vs. AdvisorShares Dorsey Wright |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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