Correlation Between Us Small and First Eagle

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

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

Diversification Opportunities for Us Small and First Eagle

0.92

Correlation Coefficient

Us Small  First Eagle

Almost no diversification

The 3 months correlation between DFSTX and First is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and First Eagle Smid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Smid and Us Small 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 Us Small Cap 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 Smid has no effect on the direction of Us Small i.e., Us Small and First Eagle go up and down completely randomly.

Pair Corralation between Us Small and First Eagle

Assuming the 90 days horizon Us Small Cap is expected to under-perform the First Eagle. In addition to that, Us Small is 1.07 times more volatile than First Eagle Smid. It trades about -0.26 of its total potential returns per unit of risk. First Eagle Smid is currently generating about -0.23 per unit of volatility. If you would invest  1,220  in First Eagle Smid on October 9, 2024 and sell it today you would lose (55.00) from holding First Eagle Smid or give up 4.51% of portfolio value over 90 days.

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

Us Small Cap  vs.  First Eagle Smid

Us Small Cap

Risk-Adjusted Performance

2 of 100

Weak

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

First Eagle Smid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Eagle Smid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary 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 Us Small and First Eagle

The main advantage of trading using opposite Us Small and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Small 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 Us Small Cap and First Eagle Smid 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.