Correlation Between Cisco Systems and NURAN WIRELESS

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and NURAN WIRELESS 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 Cisco Systems and NURAN WIRELESS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and NURAN WIRELESS INC, you can compare the effects of market volatilities on Cisco Systems and NURAN WIRELESS 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 Cisco Systems with a short position of NURAN WIRELESS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and NURAN WIRELESS.

Diversification Opportunities for Cisco Systems and NURAN WIRELESS

0.39

Correlation Coefficient

Cisco Systems  NURAN WIRELESS

Weak diversification

The 3 months correlation between Cisco and NURAN is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and NURAN WIRELESS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NURAN WIRELESS INC and Cisco Systems 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 Cisco Systems are associated (or correlated) with NURAN WIRELESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NURAN WIRELESS INC has no effect on the direction of Cisco Systems i.e., Cisco Systems and NURAN WIRELESS go up and down completely randomly.

Pair Corralation between Cisco Systems and NURAN WIRELESS

Assuming the 90 days horizon Cisco Systems is expected to generate 7.66 times less return on investment than NURAN WIRELESS. But when comparing it to its historical volatility, Cisco Systems is 4.68 times less risky than NURAN WIRELESS. It trades about 0.02 of its potential returns per unit of risk. NURAN WIRELESS INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4.18  in NURAN WIRELESS INC on December 29, 2024 and sell it today you would earn a total of  0.08  from holding NURAN WIRELESS INC or generate 1.91% return on investment over 90 days.

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

Cisco Systems  vs.  NURAN WIRELESS INC

Cisco Systems

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Cisco Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

NURAN WIRELESS INC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NURAN WIRELESS INC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NURAN WIRELESS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and NURAN WIRELESS

The main advantage of trading using opposite Cisco Systems and NURAN WIRELESS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, NURAN WIRELESS 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 NURAN WIRELESS will offset losses from the drop in NURAN WIRELESS's long position.

The idea behind Cisco Systems and NURAN WIRELESS INC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.