Correlation Between Cisco Systems and IShares Russell

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

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

Diversification Opportunities for Cisco Systems and IShares Russell

0.49

Correlation Coefficient

Cisco Systems  IShares Russell

Very weak diversification

The 3 months correlation between Cisco and IShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and iShares Russell Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Russell Mid 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 IShares Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Russell Mid has no effect on the direction of Cisco Systems i.e., Cisco Systems and IShares Russell go up and down completely randomly.

Pair Corralation between Cisco Systems and IShares Russell

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.86 times more return on investment than IShares Russell. However, Cisco Systems is 1.17 times less risky than IShares Russell. It trades about 0.15 of its potential returns per unit of risk. iShares Russell Mid Cap is currently generating about -0.07 per unit of risk. If you would invest  5,881  in Cisco Systems on November 28, 2024 and sell it today you would earn a total of  546.00  from holding Cisco Systems or generate 9.28% return on investment over 90 days.

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

Cisco Systems  vs.  iShares Russell Mid Cap

Cisco Systems

Risk-Adjusted Performance

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 March 2025.

iShares Russell Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Russell Mid Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, IShares Russell is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cisco Systems and IShares Russell

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

The idea behind Cisco Systems and iShares Russell Mid Cap 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.