Correlation Between Cambria Tail and Direxion Shares
Can any of the company-specific risk be diversified away by investing in both Cambria Tail and Direxion Shares 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 Direxion Shares 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 Direxion Shares ETF, you can compare the effects of market volatilities on Cambria Tail and Direxion Shares 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 Direxion Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Tail and Direxion Shares.
Diversification Opportunities for Cambria Tail and Direxion Shares
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cambria and Direxion is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Tail Risk and Direxion Shares ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Shares ETF 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 Direxion Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Shares ETF has no effect on the direction of Cambria Tail i.e., Cambria Tail and Direxion Shares go up and down completely randomly.
Pair Corralation between Cambria Tail and Direxion Shares
Given the investment horizon of 90 days Cambria Tail Risk is expected to generate 0.51 times more return on investment than Direxion Shares. However, Cambria Tail Risk is 1.95 times less risky than Direxion Shares. It trades about -0.06 of its potential returns per unit of risk. Direxion Shares ETF is currently generating about -0.09 per unit of risk. If you would invest 1,446 in Cambria Tail Risk on September 3, 2024 and sell it today you would lose (309.00) from holding Cambria Tail Risk or give up 21.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 37.78% |
| Values | Daily Returns |
Cambria Tail Risk vs. Direxion Shares ETF
Performance |
| Timeline |
| Cambria Tail Risk |
| Direxion Shares ETF |
Cambria Tail and Direxion Shares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cambria Tail and Direxion Shares
The main advantage of trading using opposite Cambria Tail and Direxion Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Tail position performs unexpectedly, Direxion Shares 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 Direxion Shares will offset losses from the drop in Direxion Shares' 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 |
| Direxion Shares vs. ProShares UltraShort FTSE | Direxion Shares vs. ProShares UltraShort MSCI | Direxion Shares vs. ProShares Ultra MSCI | Direxion Shares vs. ProShares UltraShort MSCI |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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