Correlation Between Cisco Systems and ADC Therapeutics

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

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

Diversification Opportunities for Cisco Systems and ADC Therapeutics

-0.53

Correlation Coefficient

Cisco Systems  ADC Therapeutics

Excellent diversification

The 3 months correlation between Cisco and ADC is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ADC Therapeutics SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADC Therapeutics 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 ADC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADC Therapeutics has no effect on the direction of Cisco Systems i.e., Cisco Systems and ADC Therapeutics go up and down completely randomly.

Pair Corralation between Cisco Systems and ADC Therapeutics

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.1 times more return on investment than ADC Therapeutics. However, Cisco Systems is 10.15 times less risky than ADC Therapeutics. It trades about 0.15 of its potential returns per unit of risk. ADC Therapeutics SA is currently generating about -0.02 per unit of risk. If you would invest  5,881  in Cisco Systems on November 28, 2024 and sell it today you would earn a total of  546.00  from holding Cisco Systems or generate 9.28% return on investment over 90 days.

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

Cisco Systems  vs.  ADC Therapeutics SA

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in March 2025.

ADC Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days ADC Therapeutics SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cisco Systems and ADC Therapeutics

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

The idea behind Cisco Systems and ADC Therapeutics SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.