Correlation Between Cambria Tail and MicroSectors Travel

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

By analyzing existing cross correlation between Cambria Tail Risk and MicroSectors Travel 3X, you can compare the effects of market volatilities on Cambria Tail and MicroSectors Travel 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 Cambria Tail with a short position of MicroSectors Travel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cambria Tail and MicroSectors Travel.

Diversification Opportunities for Cambria Tail and MicroSectors Travel

0.76

Correlation Coefficient

Cambria Tail  MicroSectors Travel

Poor diversification

The 3 months correlation between Cambria and MicroSectors is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cambria Tail Risk and MicroSectors Travel 3X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Travel and Cambria Tail 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 Cambria Tail Risk are associated (or correlated) with MicroSectors Travel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Travel has no effect on the direction of Cambria Tail i.e., Cambria Tail and MicroSectors Travel go up and down completely randomly.

Pair Corralation between Cambria Tail and MicroSectors Travel

Given the investment horizon of 90 days Cambria Tail Risk is expected to generate 0.12 times more return on investment than MicroSectors Travel. However, Cambria Tail Risk is 8.23 times less risky than MicroSectors Travel. It trades about -0.1 of its potential returns per unit of risk. MicroSectors Travel 3X is currently generating about -0.15 per unit of risk. 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	Significant
Accuracy	98.41%
Values	Daily Returns

Cambria Tail Risk  vs.  MicroSectors Travel 3X

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.

MicroSectors Travel

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroSectors Travel 3X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Cambria Tail and MicroSectors Travel

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

The idea behind Cambria Tail Risk and MicroSectors Travel 3X 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.