Correlation Between Health Biotchnology and First Eagle
Can any of the company-specific risk be diversified away by investing in both Health Biotchnology 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 Health Biotchnology and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Biotchnology Portfolio and First Eagle Small, you can compare the effects of market volatilities on Health Biotchnology 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 Health Biotchnology with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Biotchnology and First Eagle.
Diversification Opportunities for Health Biotchnology and First Eagle
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HEALTH and First is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and First Eagle Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Small and Health Biotchnology 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 Health Biotchnology Portfolio 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 Small has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and First Eagle go up and down completely randomly.
Pair Corralation between Health Biotchnology and First Eagle
Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the First Eagle. But the mutual fund apears to be less risky and, when comparing its historical volatility, Health Biotchnology Portfolio is 1.59 times less risky than First Eagle. The mutual fund trades about -0.01 of its potential returns per unit of risk. The First Eagle Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 866.00 in First Eagle Small on September 4, 2024 and sell it today you would earn a total of 284.00 from holding First Eagle Small or generate 32.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Biotchnology Portfolio vs. First Eagle Small
Performance |
| Timeline |
| Health Biotchnology |
| First Eagle Small |
Health Biotchnology and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Biotchnology and First Eagle
The main advantage of trading using opposite Health Biotchnology and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology 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 Health Biotchnology Portfolio and First Eagle Small 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. First Eagle Global | First Eagle vs. First Eagle Global | First Eagle vs. First Eagle Global | First Eagle vs. First Eagle Fund |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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