Correlation Between WisdomTree International and Cambria Foreign

Can any of the company-specific risk be diversified away by investing in both WisdomTree International and Cambria Foreign 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 WisdomTree International and Cambria Foreign into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WisdomTree International LargeCap and Cambria Foreign Shareholder, you can compare the effects of market volatilities on WisdomTree International and Cambria Foreign 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 WisdomTree International with a short position of Cambria Foreign. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree International and Cambria Foreign.

Diversification Opportunities for WisdomTree International and Cambria Foreign

0.74

Correlation Coefficient

WisdomTree International  Cambria Foreign

Poor diversification

The 3 months correlation between WisdomTree and Cambria is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International Large and Cambria Foreign Shareholder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Foreign Shar and WisdomTree International 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 WisdomTree International LargeCap are associated (or correlated) with Cambria Foreign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Foreign Shar has no effect on the direction of WisdomTree International i.e., WisdomTree International and Cambria Foreign go up and down completely randomly.

Pair Corralation between WisdomTree International and Cambria Foreign

Considering the 90-day investment horizon WisdomTree International is expected to generate 1.25 times less return on investment than Cambria Foreign. But when comparing it to its historical volatility, WisdomTree International LargeCap is 1.08 times less risky than Cambria Foreign. It trades about 0.09 of its potential returns per unit of risk. Cambria Foreign Shareholder is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,689  in Cambria Foreign Shareholder on February 23, 2024 and sell it today you would earn a total of  84.00  from holding Cambria Foreign Shareholder or generate 3.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

WisdomTree International Large  vs.  Cambria Foreign Shareholder

WisdomTree International

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree International LargeCap are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, WisdomTree International is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Cambria Foreign Shar

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Foreign Shareholder are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Cambria Foreign is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WisdomTree International and Cambria Foreign

The main advantage of trading using opposite WisdomTree International and Cambria Foreign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International position performs unexpectedly, Cambria Foreign 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 Cambria Foreign will offset losses from the drop in Cambria Foreign's long position.

The idea behind WisdomTree International LargeCap and Cambria Foreign Shareholder pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.