Correlation Between American Mutual and First Eagle

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

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

Diversification Opportunities for American Mutual and First Eagle

0.97

Correlation Coefficient

American Mutual  First Eagle

Almost no diversification

The 3 months correlation between American and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding American Mutual Fund and First Eagle Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle Fund and American Mutual 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 American Mutual Fund 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 Fund has no effect on the direction of American Mutual i.e., American Mutual and First Eagle go up and down completely randomly.

Pair Corralation between American Mutual and First Eagle

Assuming the 90 days horizon American Mutual is expected to generate 1.01 times less return on investment than First Eagle. But when comparing it to its historical volatility, American Mutual Fund is 1.08 times less risky than First Eagle. It trades about 0.07 of its potential returns per unit of risk. First Eagle Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,127  in First Eagle Fund on February 24, 2025 and sell it today you would earn a total of  599.00  from holding First Eagle Fund or generate 28.16% return on investment over 90 days.

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

American Mutual Fund  vs.  First Eagle Fund

American Mutual

Risk-Adjusted Performance

Very Weak

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

First Eagle Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Eagle Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 American Mutual and First Eagle

The main advantage of trading using opposite American Mutual and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Mutual 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 American Mutual Fund and First Eagle Fund 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 Commodity Directory module to find actively traded commodities issued by global exchanges.