Correlation Between Cisco Systems and Auckland International

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Auckland 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 Auckland 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 Auckland International Airport, you can compare the effects of market volatilities on Cisco Systems and Auckland 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 Auckland International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Auckland International.

Diversification Opportunities for Cisco Systems and Auckland International

0.23

Correlation Coefficient

Cisco Systems  Auckland International

Modest diversification

The 3 months correlation between Cisco and Auckland is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Auckland International Airport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auckland International 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 Auckland International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auckland International has no effect on the direction of Cisco Systems i.e., Cisco Systems and Auckland International go up and down completely randomly.

Pair Corralation between Cisco Systems and Auckland International

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.57 times less return on investment than Auckland International. But when comparing it to its historical volatility, Cisco Systems is 2.0 times less risky than Auckland International. It trades about 0.05 of its potential returns per unit of risk. Auckland International Airport is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,183  in Auckland International Airport on December 29, 2024 and sell it today you would earn a total of  99.00  from holding Auckland International Airport or generate 4.54% return on investment over 90 days.

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

Cisco Systems  vs.  Auckland International Airport

Cisco Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Auckland International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Auckland International Airport are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Auckland International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cisco Systems and Auckland International

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

The idea behind Cisco Systems and Auckland International Airport 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.