Correlation Between Cisco Systems and Blockchain Industries

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

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

Diversification Opportunities for Cisco Systems and Blockchain Industries

-0.3

Correlation Coefficient

Cisco Systems  Blockchain Industries

Very good diversification

The 3 months correlation between Cisco and Blockchain is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Blockchain Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blockchain Industries 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 Blockchain Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blockchain Industries has no effect on the direction of Cisco Systems i.e., Cisco Systems and Blockchain Industries go up and down completely randomly.

Pair Corralation between Cisco Systems and Blockchain Industries

Given the investment horizon of 90 days Cisco Systems is expected to generate 4.08 times less return on investment than Blockchain Industries. But when comparing it to its historical volatility, Cisco Systems is 7.63 times less risky than Blockchain Industries. It trades about 0.05 of its potential returns per unit of risk. Blockchain Industries is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1.80  in Blockchain Industries on December 29, 2024 and sell it today you would lose (0.15) from holding Blockchain Industries or give up 8.33% of portfolio value over 90 days.

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

Cisco Systems  vs.  Blockchain Industries

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.

Blockchain Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blockchain Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal forward indicators, Blockchain Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Blockchain Industries

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

The idea behind Cisco Systems and Blockchain Industries 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.