Correlation Between Invesco FTSE and Cambria Foreign

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

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

Diversification Opportunities for Invesco FTSE and Cambria Foreign

0.89

Correlation Coefficient

Invesco FTSE  Cambria Foreign

Very poor diversification

The 3 months correlation between Invesco and Cambria is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Invesco FTSE RAFI 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 Invesco FTSE 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 Invesco FTSE RAFI 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 Invesco FTSE i.e., Invesco FTSE and Cambria Foreign go up and down completely randomly.

Pair Corralation between Invesco FTSE and Cambria Foreign

Considering the 90-day investment horizon Invesco FTSE RAFI is expected to under-perform the Cambria Foreign. In addition to that, Invesco FTSE is 1.1 times more volatile than Cambria Foreign Shareholder. It trades about 0.0 of its total potential returns per unit of risk. Cambria Foreign Shareholder is currently generating about 0.09 per unit of volatility. If you would invest  2,739  in Cambria Foreign Shareholder on March 9, 2024 and sell it today you would earn a total of  38.00  from holding Cambria Foreign Shareholder or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Invesco FTSE RAFI  vs.  Cambria Foreign Shareholder

Invesco FTSE RAFI

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco FTSE RAFI are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Invesco FTSE is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Cambria Foreign Shar

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cambria Foreign Shareholder are ranked lower than 7 (%) 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 Invesco FTSE and Cambria Foreign

The main advantage of trading using opposite Invesco FTSE and Cambria Foreign positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco FTSE 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 Invesco FTSE RAFI 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.