Correlation Between GM and First Eagle
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and First Eagle Global, you can compare the effects of market volatilities on GM 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 GM with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and First Eagle.
Diversification Opportunities for GM and First Eagle
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between GM and First is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and First Eagle go up and down completely randomly.
Pair Corralation between GM and First Eagle
Allowing for the 90-day total investment horizon General Motors is expected to generate 4.8 times more return on investment than First Eagle. However, GM is 4.8 times more volatile than First Eagle Global. It trades about 0.07 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 3,524 in General Motors on August 28, 2024 and sell it today you would earn a total of 2,496 from holding General Motors or generate 70.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. First Eagle Global
Performance |
| Timeline |
| General Motors |
| First Eagle Global |
GM and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and First Eagle
The main advantage of trading using opposite GM and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and First Eagle Global 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. Blackrock Conservative Prprdptfinstttnl | First Eagle vs. Adams Diversified Equity | First Eagle vs. Western Asset Diversified | First Eagle vs. Pimco Diversified Income |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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