Correlation Between Cisco Systems and Chengdu PUTIAN

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

By analyzing existing cross correlation between Cisco Systems and Chengdu PUTIAN Telecommunications, you can compare the effects of market volatilities on Cisco Systems and Chengdu PUTIAN 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 Chengdu PUTIAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Chengdu PUTIAN.

Diversification Opportunities for Cisco Systems and Chengdu PUTIAN

0.55

Correlation Coefficient

Cisco Systems  Chengdu PUTIAN

Very weak diversification

The 3 months correlation between Cisco and Chengdu is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Chengdu PUTIAN Telecommunicati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chengdu PUTIAN Telec 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 Chengdu PUTIAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chengdu PUTIAN Telec has no effect on the direction of Cisco Systems i.e., Cisco Systems and Chengdu PUTIAN go up and down completely randomly.

Pair Corralation between Cisco Systems and Chengdu PUTIAN

Assuming the 90 days horizon Cisco Systems is expected to under-perform the Chengdu PUTIAN. But the stock apears to be less risky and, when comparing its historical volatility, Cisco Systems is 2.18 times less risky than Chengdu PUTIAN. The stock trades about -0.01 of its potential returns per unit of risk. The Chengdu PUTIAN Telecommunications is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7.20  in Chengdu PUTIAN Telecommunications on December 20, 2024 and sell it today you would earn a total of  0.10  from holding Chengdu PUTIAN Telecommunications or generate 1.39% return on investment over 90 days.

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

Cisco Systems  vs.  Chengdu PUTIAN Telecommunicati

Cisco Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cisco Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Chengdu PUTIAN Telec

Risk-Adjusted Performance

Weak

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

Pair Trading with Cisco Systems and Chengdu PUTIAN

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

The idea behind Cisco Systems and Chengdu PUTIAN Telecommunications 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.