Correlation Between WisdomTree International and Cambria Global

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

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

Diversification Opportunities for WisdomTree International and Cambria Global

0.76

Correlation Coefficient

WisdomTree International  Cambria Global

Poor diversification

The 3 months correlation between WisdomTree and Cambria is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree International MidCa and Cambria Global Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Value 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 MidCap 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 Value has no effect on the direction of WisdomTree International i.e., WisdomTree International and Cambria Global go up and down completely randomly.

Pair Corralation between WisdomTree International and Cambria Global

Considering the 90-day investment horizon WisdomTree International MidCap is expected to under-perform the Cambria Global. But the etf apears to be less risky and, when comparing its historical volatility, WisdomTree International MidCap is 1.25 times less risky than Cambria Global. The etf trades about -0.02 of its potential returns per unit of risk. The Cambria Global Value is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,118  in Cambria Global Value on September 2, 2024 and sell it today you would lose (12.00) from holding Cambria Global Value or give up 0.57% of portfolio value over 90 days.

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

WisdomTree International MidCa  vs.  Cambria Global Value

WisdomTree International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree International MidCap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, WisdomTree International is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Cambria Global Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Global Value has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cambria Global is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WisdomTree International and Cambria Global

The main advantage of trading using opposite WisdomTree International and Cambria Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree International 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 WisdomTree International MidCap and Cambria Global Value 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.