Correlation Between First Eagle and First American
Can any of the company-specific risk be diversified away by investing in both First Eagle and First American 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 First Eagle and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Eagle Fund and First American Funds, you can compare the effects of market volatilities on First Eagle and First American 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 First Eagle with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Eagle and First American.
Diversification Opportunities for First Eagle and First American
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding First Eagle Fund and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds and First Eagle 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 First Eagle Fund are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of First Eagle i.e., First Eagle and First American go up and down completely randomly.
Pair Corralation between First Eagle and First American
Assuming the 90 days horizon First Eagle Fund is expected to generate 5.03 times more return on investment than First American. However, First Eagle is 5.03 times more volatile than First American Funds. It trades about 0.17 of its potential returns per unit of risk. First American Funds is currently generating about 0.12 per unit of risk. If you would invest 1,392 in First Eagle Fund on September 3, 2024 and sell it today you would earn a total of 218.00 from holding First Eagle Fund or generate 15.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Eagle Fund vs. First American Funds
Performance |
| Timeline |
| First Eagle Fund |
| First American Funds |
First Eagle and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Eagle and First American
The main advantage of trading using opposite First Eagle and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Eagle position performs unexpectedly, First American 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 American will offset losses from the drop in First American's long position.| First Eagle vs. First American Funds | First Eagle vs. First American Funds | First Eagle vs. First American Funds | First Eagle vs. First American Funds |
| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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