Correlation Between First American and First Eagle
Can any of the company-specific risk be diversified away by investing in both First American 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 First American and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Funds and First Eagle Fund, you can compare the effects of market volatilities on First American 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 First American with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and First Eagle.
Diversification Opportunities for First American and First Eagle
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds and First Eagle Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Fund and First American 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 American Funds 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 Fund has no effect on the direction of First American i.e., First American and First Eagle go up and down completely randomly.
Pair Corralation between First American and First Eagle
If you would invest 1,573 in First Eagle Fund on September 4, 2024 and sell it today you would earn a total of 39.00 from holding First Eagle Fund or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
First American Funds vs. First Eagle Fund
Performance |
| Timeline |
| First American Funds |
| First Eagle Fund |
First American and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and First Eagle
The main advantage of trading using opposite First American and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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.| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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