Correlation Between American Funds and First Eagle
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Conservative and First Eagle Global, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and First Eagle.
Diversification Opportunities for American Funds and First Eagle
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and First Eagle Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Global and American Funds 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 American Funds Conservative 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 Global has no effect on the direction of American Funds i.e., American Funds and First Eagle go up and down completely randomly.
Pair Corralation between American Funds and First Eagle
Assuming the 90 days horizon American Funds Conservative is expected to generate 0.89 times more return on investment than First Eagle. However, American Funds Conservative is 1.13 times less risky than First Eagle. It trades about 0.1 of its potential returns per unit of risk. First Eagle Global is currently generating about 0.08 per unit of risk. If you would invest 1,130 in American Funds Conservative on August 30, 2024 and sell it today you would earn a total of 240.00 from holding American Funds Conservative or generate 21.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Conservative vs. First Eagle Global
Performance |
| Timeline |
| American Funds Conse |
| First Eagle Global |
American Funds and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and First Eagle
The main advantage of trading using opposite American Funds and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Artisan Select Equity | American Funds vs. Dreyfusstandish Global Fixed | American Funds vs. Gmo Global Equity | American Funds vs. Dodge International Stock |
| First Eagle vs. Wasatch Small Cap | First Eagle vs. Tax Managed Mid Small | First Eagle vs. Lord Abbett Diversified | First Eagle vs. American Century Diversified |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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