Correlation Between Cisco Systems and Citic

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

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

Diversification Opportunities for Cisco Systems and Citic

0.29

Correlation Coefficient

Cisco Systems  Citic

Modest diversification

The 3 months correlation between Cisco and Citic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Citic Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Ltd ADR 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 Citic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Ltd ADR has no effect on the direction of Cisco Systems i.e., Cisco Systems and Citic go up and down completely randomly.

Pair Corralation between Cisco Systems and Citic

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.37 times less return on investment than Citic. But when comparing it to its historical volatility, Cisco Systems is 2.65 times less risky than Citic. It trades about 0.07 of its potential returns per unit of risk. Citic Ltd ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  562.00  in Citic Ltd ADR on December 28, 2024 and sell it today you would earn a total of  21.00  from holding Citic Ltd ADR or generate 3.74% return on investment over 90 days.

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

Cisco Systems  vs.  Citic Ltd ADR

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.

Citic Ltd ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Ltd ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, Citic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cisco Systems and Citic

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

The idea behind Cisco Systems and Citic Ltd ADR 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 Stocks Directory module to find actively traded stocks across global markets.