Correlation Between Cisco Systems and C21 Investments

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and C21 Investments 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 C21 Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and C21 Investments, you can compare the effects of market volatilities on Cisco Systems and C21 Investments 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 C21 Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and C21 Investments.

Diversification Opportunities for Cisco Systems and C21 Investments

-0.53

Correlation Coefficient

Cisco Systems  C21 Investments

Excellent diversification

The 3 months correlation between Cisco and C21 is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and C21 Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C21 Investments 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 C21 Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C21 Investments has no effect on the direction of Cisco Systems i.e., Cisco Systems and C21 Investments go up and down completely randomly.

Pair Corralation between Cisco Systems and C21 Investments

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.13 times more return on investment than C21 Investments. However, Cisco Systems is 7.98 times less risky than C21 Investments. It trades about 0.28 of its potential returns per unit of risk. C21 Investments is currently generating about 0.03 per unit of risk. If you would invest  4,923  in Cisco Systems on September 12, 2024 and sell it today you would earn a total of  949.00  from holding Cisco Systems or generate 19.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Cisco Systems  vs.  C21 Investments

Cisco Systems

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 21 (%) 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.

C21 Investments

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in C21 Investments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, C21 Investments reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and C21 Investments

The main advantage of trading using opposite Cisco Systems and C21 Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, C21 Investments 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 C21 Investments will offset losses from the drop in C21 Investments' long position.

The idea behind Cisco Systems and C21 Investments 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.