Correlation Between Cambria Trinity and First Trust
Can any of the company-specific risk be diversified away by investing in both Cambria Trinity 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 Trinity 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 Trinity ETF and First Trust Dorsey, you can compare the effects of market volatilities on Cambria Trinity 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 Trinity with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Trinity and First Trust.
Diversification Opportunities for Cambria Trinity and First Trust
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cambria and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Trinity ETF and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey and Cambria Trinity 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 Trinity ETF 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 Dorsey has no effect on the direction of Cambria Trinity i.e., Cambria Trinity and First Trust go up and down completely randomly.
Pair Corralation between Cambria Trinity and First Trust
Given the investment horizon of 90 days Cambria Trinity is expected to generate 4.79 times less return on investment than First Trust. But when comparing it to its historical volatility, Cambria Trinity ETF is 2.02 times less risky than First Trust. It trades about 0.04 of its potential returns per unit of risk. First Trust Dorsey is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,355 in First Trust Dorsey on September 1, 2024 and sell it today you would earn a total of 369.00 from holding First Trust Dorsey or generate 15.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cambria Trinity ETF vs. First Trust Dorsey
Performance |
| Timeline |
| Cambria Trinity ETF |
| First Trust Dorsey |
Cambria Trinity and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cambria Trinity and First Trust
The main advantage of trading using opposite Cambria Trinity and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambria Trinity 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 Trinity vs. Cambria Global Asset | Cambria Trinity vs. Cambria Global Value | Cambria Trinity vs. Cambria Foreign Shareholder | Cambria Trinity vs. Cambria Value and |
| First Trust vs. Cambria Global Asset | First Trust vs. Cambria Global Value | First Trust vs. Cambria Foreign Shareholder | First Trust vs. Cambria Value and |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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