Correlation Between Cisco Systems and JPMorgan Diversified

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

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

Diversification Opportunities for Cisco Systems and JPMorgan Diversified

-0.21

Correlation Coefficient

Cisco Systems  JPMorgan Diversified

Very good diversification

The 3 months correlation between Cisco and JPMorgan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and JPMorgan Diversified Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Diversified 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 JPMorgan Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Diversified has no effect on the direction of Cisco Systems i.e., Cisco Systems and JPMorgan Diversified go up and down completely randomly.

Pair Corralation between Cisco Systems and JPMorgan Diversified

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.21 times more return on investment than JPMorgan Diversified. However, Cisco Systems is 1.21 times more volatile than JPMorgan Diversified Return. It trades about 0.07 of its potential returns per unit of risk. JPMorgan Diversified Return is currently generating about -0.12 per unit of risk. If you would invest  5,879  in Cisco Systems on December 29, 2024 and sell it today you would earn a total of  261.00  from holding Cisco Systems or generate 4.44% return on investment over 90 days.

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

Cisco Systems  vs.  JPMorgan Diversified Return

Cisco Systems

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

JPMorgan Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days JPMorgan Diversified Return 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 JPMorgan Diversified

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

The idea behind Cisco Systems and JPMorgan Diversified Return 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.