Correlation Between RPAR Risk and Cambria Global

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

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

Diversification Opportunities for RPAR Risk and Cambria Global

0.8

Correlation Coefficient

RPAR Risk  Cambria Global

Very poor diversification

The 3 months correlation between RPAR and Cambria is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding RPAR Risk Parity 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 RPAR Risk 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 RPAR Risk Parity 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 RPAR Risk i.e., RPAR Risk and Cambria Global go up and down completely randomly.

Pair Corralation between RPAR Risk and Cambria Global

Given the investment horizon of 90 days RPAR Risk Parity is expected to under-perform the Cambria Global. But the etf apears to be less risky and, when comparing its historical volatility, RPAR Risk Parity is 1.24 times less risky than Cambria Global. The etf trades about -0.13 of its potential returns per unit of risk. The Cambria Global Asset is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,843  in Cambria Global Asset on January 25, 2024 and sell it today you would earn a total of  18.00  from holding Cambria Global Asset or generate 0.63% return on investment over 90 days.

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

RPAR Risk Parity  vs.  Cambria Global Asset

RPAR Risk Parity

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RPAR Risk Parity are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, RPAR Risk is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Cambria Global Asset

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Global Asset are ranked lower than 9 (%) 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RPAR Risk and Cambria Global

The main advantage of trading using opposite RPAR Risk and Cambria Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RPAR Risk 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 RPAR Risk Parity 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.