Correlation Between Health Biotchnology and First Eagle

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

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

Diversification Opportunities for Health Biotchnology and First Eagle

0.55

Correlation Coefficient

Health Biotchnology  First Eagle

Very weak diversification

The 3 months correlation between Health and First is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Health Biotchnology Portfolio and First Eagle Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Funds and Health Biotchnology 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 Health Biotchnology Portfolio 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 Funds has no effect on the direction of Health Biotchnology i.e., Health Biotchnology and First Eagle go up and down completely randomly.

Pair Corralation between Health Biotchnology and First Eagle

Assuming the 90 days horizon Health Biotchnology Portfolio is expected to under-perform the First Eagle. In addition to that, Health Biotchnology is 1.05 times more volatile than First Eagle Funds. It trades about -0.32 of its total potential returns per unit of risk. First Eagle Funds is currently generating about -0.22 per unit of volatility. If you would invest  1,134  in First Eagle Funds on September 15, 2024 and sell it today you would lose (42.00) from holding First Eagle Funds or give up 3.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Health Biotchnology Portfolio  vs.  First Eagle Funds

Health Biotchnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Biotchnology Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

First Eagle Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Eagle Funds has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Health Biotchnology and First Eagle

The main advantage of trading using opposite Health Biotchnology and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Biotchnology 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 Health Biotchnology Portfolio and First Eagle Funds 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.