Correlation Between Cisco Systems and Altair International

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

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

Diversification Opportunities for Cisco Systems and Altair International

-0.6

Correlation Coefficient

Cisco Systems  Altair International

Excellent diversification

The 3 months correlation between Cisco and Altair is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Altair International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair International Corp 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 Altair International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair International Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Altair International go up and down completely randomly.

Pair Corralation between Cisco Systems and Altair International

Given the investment horizon of 90 days Cisco Systems is expected to generate 38.06 times less return on investment than Altair International. But when comparing it to its historical volatility, Cisco Systems is 13.38 times less risky than Altair International. It trades about 0.03 of its potential returns per unit of risk. Altair International Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5.30  in Altair International Corp on October 4, 2024 and sell it today you would lose (1.30) from holding Altair International Corp or give up 24.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.7%
Values	Daily Returns

Cisco Systems  vs.  Altair International Corp

Cisco Systems

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Altair International Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Altair International Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Altair International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Altair International

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

The idea behind Cisco Systems and Altair International Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.