Correlation Between State Street and First Eagle
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Target and First Eagle Gold, you can compare the effects of market volatilities on State Street 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 State Street with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and First Eagle.
Diversification Opportunities for State Street and First Eagle
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between State and First is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target 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 State Street 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 State Street Target 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 State Street i.e., State Street and First Eagle go up and down completely randomly.
Pair Corralation between State Street and First Eagle
Assuming the 90 days horizon State Street is expected to generate 1.25 times less return on investment than First Eagle. But when comparing it to its historical volatility, State Street Target is 3.44 times less risky than First Eagle. It trades about 0.11 of its potential returns per unit of risk. First Eagle Gold is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,178 in First Eagle Gold on September 2, 2024 and sell it today you would earn a total of 412.00 from holding First Eagle Gold or generate 18.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Target vs. First Eagle Gold
Performance |
| Timeline |
| State Street Target |
| First Eagle Gold |
State Street and First Eagle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and First Eagle
The main advantage of trading using opposite State Street and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. Fundamental Large Cap | State Street vs. Dodge Cox Stock | State Street vs. Fidelity Series 1000 | State Street vs. Touchstone Large Cap |
| First Eagle vs. Franklin Gold Precious | First Eagle vs. First Eagle Gold | First Eagle vs. First Eagle Global | First Eagle vs. Ivy Asset Strategy |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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