Correlation Between IShares Global and Cambria Cannabis

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

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

Diversification Opportunities for IShares Global and Cambria Cannabis

0.73

Correlation Coefficient

IShares Global  Cambria Cannabis

Poor diversification

The 3 months correlation between IShares and Cambria is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Clean and Cambria Cannabis ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Cannabis ETF and IShares Global 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 iShares Global Clean are associated (or correlated) with Cambria Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Cannabis ETF has no effect on the direction of IShares Global i.e., IShares Global and Cambria Cannabis go up and down completely randomly.

Pair Corralation between IShares Global and Cambria Cannabis

Given the investment horizon of 90 days iShares Global Clean is expected to under-perform the Cambria Cannabis. But the etf apears to be less risky and, when comparing its historical volatility, iShares Global Clean is 1.54 times less risky than Cambria Cannabis. The etf trades about -0.11 of its potential returns per unit of risk. The Cambria Cannabis ETF is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  583.00  in Cambria Cannabis ETF on September 2, 2024 and sell it today you would lose (27.00) from holding Cambria Cannabis ETF or give up 4.63% of portfolio value over 90 days.

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

iShares Global Clean  vs.  Cambria Cannabis ETF

iShares Global Clean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Global Clean has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Cambria Cannabis ETF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambria Cannabis ETF has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Cambria Cannabis is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares Global and Cambria Cannabis

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

The idea behind iShares Global Clean and Cambria 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.