Correlation Between Cisco Systems and Adit EdTech

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

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

Diversification Opportunities for Cisco Systems and Adit EdTech

-0.74

Correlation Coefficient

Cisco Systems  Adit EdTech

Pay attention - limited upside

The 3 months correlation between Cisco and Adit is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Adit EdTech Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adit EdTech Acquisition 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 Adit EdTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adit EdTech Acquisition has no effect on the direction of Cisco Systems i.e., Cisco Systems and Adit EdTech go up and down completely randomly.

Pair Corralation between Cisco Systems and Adit EdTech

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.28 times more return on investment than Adit EdTech. However, Cisco Systems is 3.52 times less risky than Adit EdTech. It trades about 0.05 of its potential returns per unit of risk. Adit EdTech Acquisition is currently generating about -0.03 per unit of risk. If you would invest  4,477  in Cisco Systems on September 20, 2024 and sell it today you would earn a total of  1,276  from holding Cisco Systems or generate 28.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	52.53%
Values	Daily Returns

Cisco Systems  vs.  Adit EdTech Acquisition

Cisco Systems

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Adit EdTech Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adit EdTech Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Adit EdTech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and Adit EdTech

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

The idea behind Cisco Systems and Adit EdTech Acquisition 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.