Correlation Between Dow Jones and First Eagle
Can any of the company-specific risk be diversified away by investing in both Dow Jones and First Eagle 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 Dow Jones and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and First Eagle Small, you can compare the effects of market volatilities on Dow Jones and First Eagle 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 Dow Jones with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and First Eagle.
Diversification Opportunities for Dow Jones and First Eagle
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and First Eagle Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Small and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle Small has no effect on the direction of Dow Jones i.e., Dow Jones and First Eagle go up and down completely randomly.
Pair Corralation between Dow Jones and First Eagle
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.09 times less return on investment than First Eagle. But when comparing it to its historical volatility, Dow Jones Industrial is 1.74 times less risky than First Eagle. It trades about 0.08 of its potential returns per unit of risk. First Eagle Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 870.00 in First Eagle Small on September 3, 2024 and sell it today you would earn a total of 276.00 from holding First Eagle Small or generate 31.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. First Eagle Small
Performance |
| Timeline |
Dow Jones and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
First Eagle Small
Pair trading matchups for First Eagle
Pair Trading with Dow Jones and First Eagle
The main advantage of trading using opposite Dow Jones and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, First Eagle 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 First Eagle will offset losses from the drop in First Eagle's long position.| Dow Jones vs. Eastern Co | Dow Jones vs. Uber Technologies | Dow Jones vs. AKITA Drilling | Dow Jones vs. Chemours Co |
| First Eagle vs. Health Biotchnology Portfolio | First Eagle vs. Fidelity Advisor Health | First Eagle vs. Prudential Health Sciences | First Eagle vs. Alphacentric Lifesci Healthcare |
Check out your portfolio center.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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