Correlation Between Great Elm and First Eagle

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

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

Diversification Opportunities for Great Elm and First Eagle

0.41

Correlation Coefficient

Great Elm  First Eagle

Very weak diversification

The 3 months correlation between Great and First is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Great Elm Capital and First Eagle Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Alternative and Great Elm 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 Great Elm Capital 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 Alternative has no effect on the direction of Great Elm i.e., Great Elm and First Eagle go up and down completely randomly.

Pair Corralation between Great Elm and First Eagle

Assuming the 90 days horizon Great Elm is expected to generate 1.09 times less return on investment than First Eagle. In addition to that, Great Elm is 1.23 times more volatile than First Eagle Alternative. It trades about 0.05 of its total potential returns per unit of risk. First Eagle Alternative is currently generating about 0.07 per unit of volatility. If you would invest  2,014  in First Eagle Alternative on September 19, 2024 and sell it today you would earn a total of  421.00  from holding First Eagle Alternative or generate 20.9% return on investment over 90 days.

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

Great Elm Capital  vs.  First Eagle Alternative

Great Elm Capital

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Great Elm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

First Eagle Alternative

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Alternative are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Great Elm and First Eagle

The main advantage of trading using opposite Great Elm and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Elm 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 Great Elm Capital and First Eagle Alternative 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 Stocks Directory module to find actively traded stocks across global markets.