Correlation Between First Eagle and American Funds

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Can any of the company-specific risk be diversified away by investing in both First Eagle and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Eagle Gold and American Funds 2030, you can compare the effects of market volatilities on First Eagle and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Eagle and American Funds.

Diversification Opportunities for First Eagle and American Funds

-0.05
  Correlation Coefficient

Good diversification

The 3 months correlation between First and American is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding First Eagle Gold and American Funds 2030 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2030 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 Gold are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2030 has no effect on the direction of First Eagle i.e., First Eagle and American Funds go up and down completely randomly.

Pair Corralation between First Eagle and American Funds

Assuming the 90 days horizon First Eagle Gold is expected to under-perform the American Funds. In addition to that, First Eagle is 5.32 times more volatile than American Funds 2030. It trades about -0.05 of its total potential returns per unit of risk. American Funds 2030 is currently generating about 0.02 per unit of volatility. If you would invest  1,816  in American Funds 2030 on September 12, 2024 and sell it today you would earn a total of  2.00  from holding American Funds 2030 or generate 0.11% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Eagle Gold  vs.  American Funds 2030

 Performance 
       Timeline  
First Eagle Gold 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days First Eagle Gold has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
American Funds 2030 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in American Funds 2030 are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Eagle and American Funds Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Eagle and American Funds

The main advantage of trading using opposite First Eagle and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Eagle position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.
The idea behind First Eagle Gold and American Funds 2030 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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