Correlation Between Cisco Systems and ASX

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

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

Diversification Opportunities for Cisco Systems and ASX

-0.68

Correlation Coefficient

Cisco Systems  ASX

Excellent diversification

The 3 months correlation between Cisco and ASX is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ASX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited has no effect on the direction of Cisco Systems i.e., Cisco Systems and ASX go up and down completely randomly.

Pair Corralation between Cisco Systems and ASX

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.5 times more return on investment than ASX. However, Cisco Systems is 2.01 times less risky than ASX. It trades about 0.05 of its potential returns per unit of risk. ASX Limited is currently generating about 0.0 per unit of risk. If you would invest  4,569  in Cisco Systems on October 23, 2024 and sell it today you would earn a total of  1,532  from holding Cisco Systems or generate 33.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	91.52%
Values	Daily Returns

Cisco Systems  vs.  ASX Limited

Cisco Systems

Risk-Adjusted Performance

11 of 100

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 February 2025.

ASX Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cisco Systems and ASX

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

The idea behind Cisco Systems and ASX Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.