Correlation Between Arrow DWA and Cambria Global

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

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

Diversification Opportunities for Arrow DWA and Cambria Global

-0.08

Correlation Coefficient

Arrow DWA  Cambria Global

Good diversification

The 3 months correlation between Arrow and Cambria is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Arrow DWA Tactical and Cambria Global Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Global Momentum and Arrow DWA 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 Arrow DWA Tactical 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 Momentum has no effect on the direction of Arrow DWA i.e., Arrow DWA and Cambria Global go up and down completely randomly.

Pair Corralation between Arrow DWA and Cambria Global

Given the investment horizon of 90 days Arrow DWA Tactical is expected to under-perform the Cambria Global. But the etf apears to be less risky and, when comparing its historical volatility, Arrow DWA Tactical is 1.02 times less risky than Cambria Global. The etf trades about -0.18 of its potential returns per unit of risk. The Cambria Global Momentum is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,960  in Cambria Global Momentum on September 26, 2024 and sell it today you would lose (61.00) from holding Cambria Global Momentum or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Arrow DWA Tactical  vs.  Cambria Global Momentum

Arrow DWA Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow DWA Tactical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Etf's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Cambria Global Momentum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arrow DWA and Cambria Global

The main advantage of trading using opposite Arrow DWA and Cambria Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow DWA 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 Arrow DWA Tactical and Cambria Global Momentum 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.