Correlation Between Sierra Tactical and First Eagle

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

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

Diversification Opportunities for Sierra Tactical and First Eagle

0.08

Correlation Coefficient

Sierra Tactical  First Eagle

Significant diversification

The 3 months correlation between Sierra and First is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sierra Tactical Risk and First Eagle Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Gold and Sierra Tactical 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 Sierra Tactical Risk 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 Gold has no effect on the direction of Sierra Tactical i.e., Sierra Tactical and First Eagle go up and down completely randomly.

Pair Corralation between Sierra Tactical and First Eagle

Assuming the 90 days horizon Sierra Tactical Risk is expected to under-perform the First Eagle. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sierra Tactical Risk is 3.15 times less risky than First Eagle. The mutual fund trades about -0.01 of its potential returns per unit of risk. The First Eagle Gold is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  2,269  in First Eagle Gold on December 29, 2024 and sell it today you would earn a total of  712.00  from holding First Eagle Gold or generate 31.38% return on investment over 90 days.

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

Sierra Tactical Risk  vs.  First Eagle Gold

Sierra Tactical Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sierra Tactical Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Sierra Tactical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Eagle Gold

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Gold are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, First Eagle showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sierra Tactical and First Eagle

The main advantage of trading using opposite Sierra Tactical and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Tactical 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 Sierra Tactical Risk and First Eagle Gold 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.