Correlation Between Alphabet and Cambria Global

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

By analyzing existing cross correlation between Alphabet Inc Class C and Cambria Global Asset, you can compare the effects of market volatilities on Alphabet and Cambria Global 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 Alphabet with a short position of Cambria Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Cambria Global.

Diversification Opportunities for Alphabet and Cambria Global

0.4

Correlation Coefficient

Alphabet  Cambria Global

Very weak diversification

The 3 months correlation between Alphabet and Cambria is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Cambria Global Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Asset and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Cambria Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Global Asset has no effect on the direction of Alphabet i.e., Alphabet and Cambria Global go up and down completely randomly.

Pair Corralation between Alphabet and Cambria Global

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.54 times more return on investment than Cambria Global. However, Alphabet is 2.54 times more volatile than Cambria Global Asset. It trades about 0.08 of its potential returns per unit of risk. Cambria Global Asset is currently generating about 0.07 per unit of risk. If you would invest  12,108  in Alphabet Inc Class C on January 24, 2024 and sell it today you would earn a total of  3,687  from holding Alphabet Inc Class C or generate 30.45% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Cambria Global Asset

Alphabet Class C

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Alphabet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Cambria Global Asset

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Global Asset are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cambria Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alphabet and Cambria Global

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

The idea behind Alphabet Inc Class C and Cambria Global Asset 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.