Correlation Between Cisco Systems and Fidelity International

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

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

Diversification Opportunities for Cisco Systems and Fidelity International

-0.6

Correlation Coefficient

Cisco Systems  Fidelity International

Excellent diversification

The 3 months correlation between Cisco and Fidelity is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Fidelity International Multifa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity International 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 Fidelity International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity International has no effect on the direction of Cisco Systems i.e., Cisco Systems and Fidelity International go up and down completely randomly.

Pair Corralation between Cisco Systems and Fidelity International

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.63 times more return on investment than Fidelity International. However, Cisco Systems is 1.63 times more volatile than Fidelity International Multifactor. It trades about 0.11 of its potential returns per unit of risk. Fidelity International Multifactor is currently generating about 0.04 per unit of risk. If you would invest  4,715  in Cisco Systems on October 12, 2024 and sell it today you would earn a total of  1,205  from holding Cisco Systems or generate 25.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

Cisco Systems  vs.  Fidelity International Multifa

Cisco Systems

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Fidelity International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity International Multifactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Fidelity International is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cisco Systems and Fidelity International

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

The idea behind Cisco Systems and Fidelity International Multifactor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.