Correlation Between IShares Semiconductor and First Eagle

Can any of the company-specific risk be diversified away by investing in both IShares Semiconductor 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 Semiconductor 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 Semiconductor ETF and First Eagle High, you can compare the effects of market volatilities on IShares Semiconductor 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 Semiconductor with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Semiconductor and First Eagle.

Diversification Opportunities for IShares Semiconductor and First Eagle

0.82

Correlation Coefficient

IShares Semiconductor  First Eagle

Very poor diversification

The 3 months correlation between IShares and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF 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 Semiconductor 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 Semiconductor ETF 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 Semiconductor i.e., IShares Semiconductor and First Eagle go up and down completely randomly.

Pair Corralation between IShares Semiconductor and First Eagle

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the First Eagle. In addition to that, IShares Semiconductor is 7.29 times more volatile than First Eagle High. It trades about -0.21 of its total potential returns per unit of risk. First Eagle High is currently generating about -0.15 per unit of volatility. If you would invest  832.00  in First Eagle High on January 25, 2024 and sell it today you would lose (7.00) from holding First Eagle High or give up 0.84% of portfolio value over 90 days.

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

iShares Semiconductor ETF  vs.  First Eagle High

iShares Semiconductor ETF

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Eagle High

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle High are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. 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 IShares Semiconductor and First Eagle

The main advantage of trading using opposite IShares Semiconductor and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Semiconductor 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 iShares Semiconductor ETF and First Eagle High 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.