Correlation Between Cambria Cannabis and Roundhill Cannabis

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

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

Diversification Opportunities for Cambria Cannabis and Roundhill Cannabis

0.53

Correlation Coefficient

Cambria Cannabis  Roundhill Cannabis

Very weak diversification

The 3 months correlation between Cambria and Roundhill is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Cannabis ETF and Roundhill Cannabis ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Cannabis ETF and Cambria Cannabis 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 Cannabis ETF are associated (or correlated) with Roundhill Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Cannabis ETF has no effect on the direction of Cambria Cannabis i.e., Cambria Cannabis and Roundhill Cannabis go up and down completely randomly.

Pair Corralation between Cambria Cannabis and Roundhill Cannabis

Given the investment horizon of 90 days Cambria Cannabis ETF is expected to under-perform the Roundhill Cannabis. But the etf apears to be less risky and, when comparing its historical volatility, Cambria Cannabis ETF is 3.23 times less risky than Roundhill Cannabis. The etf trades about -0.12 of its potential returns per unit of risk. The Roundhill Cannabis ETF is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,498  in Roundhill Cannabis ETF on February 1, 2024 and sell it today you would earn a total of  350.00  from holding Roundhill Cannabis ETF or generate 7.78% return on investment over 90 days.

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

Cambria Cannabis ETF  vs.  Roundhill Cannabis ETF

Cambria Cannabis ETF

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Cannabis ETF are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking signals, Cambria Cannabis is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Roundhill Cannabis ETF

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Cannabis ETF are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Roundhill Cannabis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cambria Cannabis and Roundhill Cannabis

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

The idea behind Cambria Cannabis ETF and Roundhill Cannabis ETF 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.