Correlation Between Precious Metals and First Eagle

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

Diversification Opportunities for Precious Metals and First Eagle

PreciousFirstDiversified AwayPreciousFirstDiversified Away100%
0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Precious and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals Fund and First Eagle Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Gold and Precious Metals 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 Precious Metals Fund 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 Gold has no effect on the direction of Precious Metals i.e., Precious Metals and First Eagle go up and down completely randomly.

Pair Corralation between Precious Metals and First Eagle

Assuming the 90 days horizon Precious Metals is expected to generate 1.74 times less return on investment than First Eagle. In addition to that, Precious Metals is 1.31 times more volatile than First Eagle Gold. It trades about 0.05 of its total potential returns per unit of risk. First Eagle Gold is currently generating about 0.12 per unit of volatility. If you would invest  2,450  in First Eagle Gold on November 26, 2024 and sell it today you would earn a total of  267.00  from holding First Eagle Gold or generate 10.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Precious Metals Fund  vs.  First Eagle Gold

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15RYPMX FEGOX
       Timeline  
Precious Metals 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Precious Metals Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Precious Metals may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb383940414243444546
First Eagle Gold 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Gold are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, First Eagle may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb232425262728

Precious Metals and First Eagle Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-6.26-4.69-3.12-1.550.01.553.184.826.458.08 0.050.100.15
JavaScript chart by amCharts 3.21.15RYPMX FEGOX
       Returns  

Pair Trading with Precious Metals and First Eagle

The main advantage of trading using opposite Precious Metals and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals 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 Precious Metals Fund and First Eagle Gold 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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