Correlation Between Cisco Systems and Capstone Technologies

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

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

Diversification Opportunities for Cisco Systems and Capstone Technologies

-0.53

Correlation Coefficient

Cisco Systems  Capstone Technologies

Excellent diversification

The 3 months correlation between Cisco and Capstone is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Capstone Technologies Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Technologies 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 Capstone Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Technologies has no effect on the direction of Cisco Systems i.e., Cisco Systems and Capstone Technologies go up and down completely randomly.

Pair Corralation between Cisco Systems and Capstone Technologies

Given the investment horizon of 90 days Cisco Systems is expected to generate 3.31 times more return on investment than Capstone Technologies. However, Cisco Systems is 3.31 times more volatile than Capstone Technologies Group. It trades about 0.07 of its potential returns per unit of risk. Capstone Technologies Group is currently generating about -0.13 per unit of risk. If you would invest  5,879  in Cisco Systems on December 29, 2024 and sell it today you would earn a total of  261.00  from holding Cisco Systems or generate 4.44% return on investment over 90 days.

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

Cisco Systems  vs.  Capstone Technologies Group

Cisco Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 5 (%) 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.

Capstone Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capstone Technologies Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Capstone Technologies is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cisco Systems and Capstone Technologies

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

The idea behind Cisco Systems and Capstone Technologies Group 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.