Correlation Between Cisco Systems and Aggressive Investors

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

By analyzing existing cross correlation between Cisco Systems and Aggressive Investors 1, you can compare the effects of market volatilities on Cisco Systems and Aggressive Investors 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 Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Aggressive Investors.

Diversification Opportunities for Cisco Systems and Aggressive Investors

0.93

Correlation Coefficient

Cisco Systems  Aggressive Investors

Almost no diversification

The 3 months correlation between Cisco and Aggressive is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors 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 Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Cisco Systems i.e., Cisco Systems and Aggressive Investors go up and down completely randomly.

Pair Corralation between Cisco Systems and Aggressive Investors

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.49 times less return on investment than Aggressive Investors. But when comparing it to its historical volatility, Cisco Systems is 1.1 times less risky than Aggressive Investors. It trades about 0.09 of its potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  9,510  in Aggressive Investors 1 on September 19, 2024 and sell it today you would earn a total of  492.00  from holding Aggressive Investors 1 or generate 5.17% return on investment over 90 days.

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

Cisco Systems  vs.  Aggressive Investors 1

Cisco Systems

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Aggressive Investors

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Investors 1 are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aggressive Investors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cisco Systems and Aggressive Investors

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

The idea behind Cisco Systems and Aggressive Investors 1 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.