Correlation Between Cisco Systems and Medicure

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

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

Diversification Opportunities for Cisco Systems and Medicure

-0.63

Correlation Coefficient

Cisco Systems  Medicure

Excellent diversification

The 3 months correlation between Cisco and Medicure is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Medicure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicure 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 Medicure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicure has no effect on the direction of Cisco Systems i.e., Cisco Systems and Medicure go up and down completely randomly.

Pair Corralation between Cisco Systems and Medicure

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.23 times more return on investment than Medicure. However, Cisco Systems is 4.33 times less risky than Medicure. It trades about 0.27 of its potential returns per unit of risk. Medicure is currently generating about -0.03 per unit of risk. If you would invest  4,942  in Cisco Systems on September 13, 2024 and sell it today you would earn a total of  917.00  from holding Cisco Systems or generate 18.56% 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.  Medicure

Cisco Systems

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 21 (%) 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.

Medicure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicure has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cisco Systems and Medicure

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

The idea behind Cisco Systems and Medicure 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.