Correlation Between ProShares Short and Cambria Tail

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

By analyzing existing cross correlation between ProShares Short Russell2000 and Cambria Tail Risk, you can compare the effects of market volatilities on ProShares Short and Cambria Tail 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 ProShares Short with a short position of Cambria Tail. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProShares Short and Cambria Tail.

Diversification Opportunities for ProShares Short and Cambria Tail

0.88

Correlation Coefficient

ProShares Short  Cambria Tail

Very poor diversification

The 3 months correlation between ProShares and Cambria is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Short Russell2000 and Cambria Tail Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambria Tail Risk and ProShares Short 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 ProShares Short Russell2000 are associated (or correlated) with Cambria Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambria Tail Risk has no effect on the direction of ProShares Short i.e., ProShares Short and Cambria Tail go up and down completely randomly.

Pair Corralation between ProShares Short and Cambria Tail

Considering the 90-day investment horizon ProShares Short Russell2000 is expected to under-perform the Cambria Tail. In addition to that, ProShares Short is 2.09 times more volatile than Cambria Tail Risk. It trades about -0.13 of its total potential returns per unit of risk. Cambria Tail Risk is currently generating about -0.1 per unit of volatility. If you would invest  1,247  in Cambria Tail Risk on May 6, 2025 and sell it today you would lose (42.00) from holding Cambria Tail Risk or give up 3.37% of portfolio value over 90 days.

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

ProShares Short Russell2000  vs.  Cambria Tail Risk

ProShares Short Russ

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short Russell2000 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Cambria Tail Risk

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ProShares Short and Cambria Tail

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

The idea behind ProShares Short Russell2000 and Cambria Tail Risk 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.