Correlation Between Cisco Systems and Firm Capital

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

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

Diversification Opportunities for Cisco Systems and Firm Capital

0.71

Correlation Coefficient

Cisco Systems  Firm Capital

Poor diversification

The 3 months correlation between Cisco and Firm is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Firm Capital Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firm Capital Property 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 Firm Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firm Capital Property has no effect on the direction of Cisco Systems i.e., Cisco Systems and Firm Capital go up and down completely randomly.

Pair Corralation between Cisco Systems and Firm Capital

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.68 times more return on investment than Firm Capital. However, Cisco Systems is 1.46 times less risky than Firm Capital. It trades about 0.31 of its potential returns per unit of risk. Firm Capital Property is currently generating about 0.09 per unit of risk. If you would invest  4,876  in Cisco Systems on September 5, 2024 and sell it today you would earn a total of  1,072  from holding Cisco Systems or generate 21.99% return on investment over 90 days.

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

Cisco Systems  vs.  Firm Capital Property

Cisco Systems

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Firm Capital Property

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Firm Capital Property are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Firm Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cisco Systems and Firm Capital

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

The idea behind Cisco Systems and Firm Capital Property 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.