Correlation Between First Eagle and American Funds

Can any of the company-specific risk be diversified away by investing in both First Eagle and American Funds 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 American Funds 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 American Funds Income, you can compare the effects of market volatilities on First Eagle and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Eagle and American Funds.

Diversification Opportunities for First Eagle and American Funds

0.8

Correlation Coefficient

First Eagle  American Funds

Very poor diversification

The 3 months correlation between First and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Eagle Global and American Funds Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Income 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Income has no effect on the direction of First Eagle i.e., First Eagle and American Funds go up and down completely randomly.

Pair Corralation between First Eagle and American Funds

Assuming the 90 days horizon First Eagle Global is expected to generate 1.42 times more return on investment than American Funds. However, First Eagle is 1.42 times more volatile than American Funds Income. It trades about 0.19 of its potential returns per unit of risk. American Funds Income is currently generating about 0.05 per unit of risk. If you would invest  6,732  in First Eagle Global on December 30, 2024 and sell it today you would earn a total of  472.00  from holding First Eagle Global or generate 7.01% return on investment over 90 days.

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

First Eagle Global  vs.  American Funds Income

First Eagle Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Global are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, First Eagle may actually be approaching a critical reversion point that can send shares even higher in April 2025.

American Funds Income

Risk-Adjusted Performance

Insignificant

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

Pair Trading with First Eagle and American Funds

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

The idea behind First Eagle Global and American Funds Income 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.