Correlation Between Cisco Systems and Collegeadvantage

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

By analyzing existing cross correlation between Cisco Systems and Collegeadvantage 529 Savings, you can compare the effects of market volatilities on Cisco Systems and Collegeadvantage 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 Collegeadvantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Collegeadvantage.

Diversification Opportunities for Cisco Systems and Collegeadvantage

0.54

Correlation Coefficient

Cisco Systems  Collegeadvantage

Very weak diversification

The 3 months correlation between Cisco and Collegeadvantage is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Collegeadvantage 529 Savings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegeadvantage 529 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 Collegeadvantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collegeadvantage 529 has no effect on the direction of Cisco Systems i.e., Cisco Systems and Collegeadvantage go up and down completely randomly.

Pair Corralation between Cisco Systems and Collegeadvantage

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.75 times more return on investment than Collegeadvantage. However, Cisco Systems is 1.75 times more volatile than Collegeadvantage 529 Savings. It trades about 0.03 of its potential returns per unit of risk. Collegeadvantage 529 Savings is currently generating about -0.02 per unit of risk. If you would invest  5,944  in Cisco Systems on December 24, 2024 and sell it today you would earn a total of  86.00  from holding Cisco Systems or generate 1.45% return on investment over 90 days.

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

Cisco Systems  vs.  Collegeadvantage 529 Savings

Cisco Systems

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 2 (%) 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 recent stock price disarray, may contribute to short-term losses for the investors.

Collegeadvantage 529

Risk-Adjusted Performance

Very Weak

Over the last 90 days Collegeadvantage 529 Savings has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Collegeadvantage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and Collegeadvantage

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

The idea behind Cisco Systems and Collegeadvantage 529 Savings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.