Correlation Between Northern Small and First Eagle

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

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

Diversification Opportunities for Northern Small and First Eagle

0.94

Correlation Coefficient

Northern Small  First Eagle

Almost no diversification

The 3 months correlation between Northern and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap 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 Northern Small 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 Northern Small Cap 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 Northern Small i.e., Northern Small and First Eagle go up and down completely randomly.

Pair Corralation between Northern Small and First Eagle

Assuming the 90 days horizon Northern Small Cap is expected to generate 1.87 times more return on investment than First Eagle. However, Northern Small is 1.87 times more volatile than First Eagle Funds. It trades about 0.16 of its potential returns per unit of risk. First Eagle Funds is currently generating about 0.18 per unit of risk. If you would invest  1,236  in Northern Small Cap on May 26, 2025 and sell it today you would earn a total of  156.00  from holding Northern Small Cap or generate 12.62% return on investment over 90 days.

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

Northern Small Cap  vs.  First Eagle Funds

Northern Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Northern Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Eagle Funds

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle Funds are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, First Eagle may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Northern Small and First Eagle

The main advantage of trading using opposite Northern Small and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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 Northern Small Cap 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.