Correlation Between Ford and First Eagle
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and First Eagle Overseas, you can compare the effects of market volatilities on Ford 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 Ford with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and First Eagle.
Diversification Opportunities for Ford and First Eagle
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ford and First is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and First Eagle Overseas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Overseas and Ford 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 Ford Motor 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 Overseas has no effect on the direction of Ford i.e., Ford and First Eagle go up and down completely randomly.
Pair Corralation between Ford and First Eagle
Taking into account the 90-day investment horizon Ford is expected to generate 7.69 times less return on investment than First Eagle. In addition to that, Ford is 3.46 times more volatile than First Eagle Overseas. It trades about 0.0 of its total potential returns per unit of risk. First Eagle Overseas is currently generating about 0.06 per unit of volatility. If you would invest 2,406 in First Eagle Overseas on August 26, 2024 and sell it today you would earn a total of 337.00 from holding First Eagle Overseas or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. First Eagle Overseas
Performance |
| Timeline |
| Ford Motor |
| First Eagle Overseas |
Ford and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and First Eagle
The main advantage of trading using opposite Ford and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and First Eagle Overseas 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.| First Eagle vs. First Eagle Global | First Eagle vs. Oppenheimer Developing Markets | First Eagle vs. Delaware Value Fund | First Eagle vs. Small Cap Value |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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