Correlation Between Cisco Systems and American Funds

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

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

Diversification Opportunities for Cisco Systems and American Funds

0.0

Correlation Coefficient

Cisco Systems  American Funds

Pay attention - limited upside

The 3 months correlation between Cisco and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and American Funds Lege in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Lege 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Lege has no effect on the direction of Cisco Systems i.e., Cisco Systems and American Funds go up and down completely randomly.

Pair Corralation between Cisco Systems and American Funds

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cisco Systems  vs.  American Funds Lege

Cisco Systems

Risk-Adjusted Performance

Insignificant

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.

American Funds Lege

Risk-Adjusted Performance

Good

Over the last 90 days American Funds Lege has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, American Funds 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 American Funds

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

The idea behind Cisco Systems and American Funds Lege 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.