Correlation Between First Eagle and Royce Opportunity

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

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

Diversification Opportunities for First Eagle and Royce Opportunity

0.35

Correlation Coefficient

First Eagle  Royce Opportunity

Weak diversification

The 3 months correlation between First and Royce is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding First Eagle Global and Royce Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Opportunity and First Eagle 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 First Eagle Global are associated (or correlated) with Royce Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Opportunity has no effect on the direction of First Eagle i.e., First Eagle and Royce Opportunity go up and down completely randomly.

Pair Corralation between First Eagle and Royce Opportunity

Assuming the 90 days horizon First Eagle Global is expected to generate 0.31 times more return on investment than Royce Opportunity. However, First Eagle Global is 3.23 times less risky than Royce Opportunity. It trades about 0.08 of its potential returns per unit of risk. Royce Opportunity Fund is currently generating about 0.01 per unit of risk. If you would invest  1,235  in First Eagle Global on December 2, 2024 and sell it today you would earn a total of  157.00  from holding First Eagle Global or generate 12.71% return on investment over 90 days.

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

First Eagle Global  vs.  Royce Opportunity Fund

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 fundamental indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Royce Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Opportunity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with First Eagle and Royce Opportunity

The main advantage of trading using opposite First Eagle and Royce Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Eagle position performs unexpectedly, Royce Opportunity 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 Royce Opportunity will offset losses from the drop in Royce Opportunity's long position.

The idea behind First Eagle Global and Royce Opportunity Fund 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.