Correlation Between Cisco Systems and Innovative International

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Innovative 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 Innovative 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 Innovative International Acquisition, you can compare the effects of market volatilities on Cisco Systems and Innovative 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 Innovative International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Innovative International.

Diversification Opportunities for Cisco Systems and Innovative International

-0.2

Correlation Coefficient

Cisco Systems  Innovative International

Good diversification

The 3 months correlation between Cisco and Innovative is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Innovative International Acqui in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative 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 Innovative International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative International has no effect on the direction of Cisco Systems i.e., Cisco Systems and Innovative International go up and down completely randomly.

Pair Corralation between Cisco Systems and Innovative International

Given the investment horizon of 90 days Cisco Systems is expected to generate 35.51 times less return on investment than Innovative International. But when comparing it to its historical volatility, Cisco Systems is 13.75 times less risky than Innovative International. It trades about 0.05 of its potential returns per unit of risk. Innovative International Acquisition is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Innovative International Acquisition on October 7, 2024 and sell it today you would earn a total of  4.00  from holding Innovative International Acquisition or generate 114.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	17.54%
Values	Daily Returns

Cisco Systems  vs.  Innovative International Acqui

Cisco Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Innovative International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cisco Systems and Innovative International

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

The idea behind Cisco Systems and Innovative International Acquisition 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.