Correlation Between Ishares Municipal and First Eagle

Can any of the company-specific risk be diversified away by investing in both Ishares Municipal 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 Ishares Municipal and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ishares Municipal Bond and First Eagle Global, you can compare the effects of market volatilities on Ishares Municipal 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 Ishares Municipal with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Municipal and First Eagle.

Diversification Opportunities for Ishares Municipal and First Eagle

0.67

Correlation Coefficient

Ishares Municipal  First Eagle

Poor diversification

The 3 months correlation between Ishares and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Municipal Bond 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 Ishares Municipal 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 Ishares Municipal Bond 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 Ishares Municipal i.e., Ishares Municipal and First Eagle go up and down completely randomly.

Pair Corralation between Ishares Municipal and First Eagle

Assuming the 90 days horizon Ishares Municipal Bond is expected to under-perform the First Eagle. But the mutual fund apears to be less risky and, when comparing its historical volatility, Ishares Municipal Bond is 1.88 times less risky than First Eagle. The mutual fund trades about -0.04 of its potential returns per unit of risk. The First Eagle Global is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,365  in First Eagle Global on December 1, 2024 and sell it today you would earn a total of  9.00  from holding First Eagle Global or generate 0.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ishares Municipal Bond  vs.  First Eagle Global

Ishares Municipal Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ishares Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Ishares Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Eagle Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Global are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Municipal and First Eagle

The main advantage of trading using opposite Ishares Municipal and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Municipal 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 Ishares Municipal Bond 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.