Correlation Between IShares Russell and First Eagle
Can any of the company-specific risk be diversified away by investing in both IShares Russell 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 IShares Russell and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Russell 2500 and First Eagle High, you can compare the effects of market volatilities on IShares Russell 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 IShares Russell with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Russell and First Eagle.
Diversification Opportunities for IShares Russell and First Eagle
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding iShares Russell 2500 and First Eagle High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle High and IShares Russell 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 iShares Russell 2500 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 High has no effect on the direction of IShares Russell i.e., IShares Russell and First Eagle go up and down completely randomly.
Pair Corralation between IShares Russell and First Eagle
Given the investment horizon of 90 days iShares Russell 2500 is expected to under-perform the First Eagle. In addition to that, IShares Russell is 4.03 times more volatile than First Eagle High. It trades about -0.15 of its total potential returns per unit of risk. First Eagle High is currently generating about -0.17 per unit of volatility. If you would invest 835.00 in First Eagle High on January 24, 2024 and sell it today you would lose (8.00) from holding First Eagle High or give up 0.96% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares Russell 2500 vs. First Eagle High
Performance |
Timeline |
iShares Russell 2500 |
First Eagle High |
IShares Russell and First Eagle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares Russell and First Eagle
The main advantage of trading using opposite IShares Russell and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Russell 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.IShares Russell vs. First Trust RiverFront | IShares Russell vs. First Trust RiverFront | IShares Russell vs. Arrow DWA Tactical | IShares Russell vs. First Trust Developed |
First Eagle vs. First Eagle Global | First Eagle vs. First Eagle Global | First Eagle vs. First Eagle Global | First Eagle vs. First Eagle Fund |
Check out your portfolio center.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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