Correlation Between Davis Financial and First Eagle

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

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

Diversification Opportunities for Davis Financial and First Eagle

0.9

Correlation Coefficient

Davis Financial  First Eagle

Almost no diversification

The 3 months correlation between Davis and First is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund 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 Davis Financial 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 Davis Financial 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 Global has no effect on the direction of Davis Financial i.e., Davis Financial and First Eagle go up and down completely randomly.

Pair Corralation between Davis Financial and First Eagle

Assuming the 90 days horizon Davis Financial Fund is expected to generate 2.47 times more return on investment than First Eagle. However, Davis Financial is 2.47 times more volatile than First Eagle Global. It trades about 0.09 of its potential returns per unit of risk. First Eagle Global is currently generating about 0.08 per unit of risk. If you would invest  4,517  in Davis Financial Fund on December 2, 2024 and sell it today you would earn a total of  2,685  from holding Davis Financial Fund or generate 59.44% return on investment over 90 days.

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

Davis Financial Fund  vs.  First Eagle Global

Davis Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Davis Financial Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Davis Financial 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 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward 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 Davis Financial and First Eagle

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

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..