Correlation Between Cisco Systems and JP Morgan

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

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

Diversification Opportunities for Cisco Systems and JP Morgan

-0.72

Correlation Coefficient

Cisco Systems  JP Morgan

Pay attention - limited upside

The 3 months correlation between Cisco and JIRE is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and JP Morgan Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JP Morgan Exchange 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 JP Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JP Morgan Exchange has no effect on the direction of Cisco Systems i.e., Cisco Systems and JP Morgan go up and down completely randomly.

Pair Corralation between Cisco Systems and JP Morgan

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.24 times more return on investment than JP Morgan. However, Cisco Systems is 1.24 times more volatile than JP Morgan Exchange Traded. It trades about 0.26 of its potential returns per unit of risk. JP Morgan Exchange Traded is currently generating about -0.16 per unit of risk. If you would invest  5,568  in Cisco Systems on August 30, 2024 and sell it today you would earn a total of  361.00  from holding Cisco Systems or generate 6.48% return on investment over 90 days.

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

Cisco Systems  vs.  JP Morgan Exchange Traded

Cisco Systems

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 20 (%) 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.

JP Morgan Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JP Morgan Exchange Traded has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with Cisco Systems and JP Morgan

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

The idea behind Cisco Systems and JP Morgan Exchange Traded 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 Transaction History module to view history of all your transactions and understand their impact on performance.