Correlation Between Cisco Systems and Network 1

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Network 1 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 Network 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and Network 1 Technologies, you can compare the effects of market volatilities on Cisco Systems and Network 1 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 Network 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Network 1.

Diversification Opportunities for Cisco Systems and Network 1

-0.78

Correlation Coefficient

Cisco Systems  Network 1

Pay attention - limited upside

The 3 months correlation between Cisco and Network is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Network 1 Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network 1 Technologies 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 Network 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network 1 Technologies has no effect on the direction of Cisco Systems i.e., Cisco Systems and Network 1 go up and down completely randomly.

Pair Corralation between Cisco Systems and Network 1

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.29 times more return on investment than Network 1. However, Cisco Systems is 3.4 times less risky than Network 1. It trades about 0.29 of its potential returns per unit of risk. Network 1 Technologies is currently generating about -0.04 per unit of risk. If you would invest  4,932  in Cisco Systems on September 4, 2024 and sell it today you would earn a total of  1,011  from holding Cisco Systems or generate 20.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Cisco Systems  vs.  Network 1 Technologies

Cisco Systems

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Network 1 Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Network 1 Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Cisco Systems and Network 1

The main advantage of trading using opposite Cisco Systems and Network 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Network 1 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 Network 1 will offset losses from the drop in Network 1's long position.

The idea behind Cisco Systems and Network 1 Technologies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.