Correlation Between Cisco Systems and Nukkleus

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

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

Diversification Opportunities for Cisco Systems and Nukkleus

0.34

Correlation Coefficient

Cisco Systems  Nukkleus

Weak diversification

The 3 months correlation between Cisco and Nukkleus is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Nukkleus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nukkleus 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 Nukkleus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nukkleus has no effect on the direction of Cisco Systems i.e., Cisco Systems and Nukkleus go up and down completely randomly.

Pair Corralation between Cisco Systems and Nukkleus

Given the investment horizon of 90 days Cisco Systems is expected to generate 24.91 times less return on investment than Nukkleus. But when comparing it to its historical volatility, Cisco Systems is 31.8 times less risky than Nukkleus. It trades about 0.06 of its potential returns per unit of risk. Nukkleus is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,154  in Nukkleus on October 11, 2024 and sell it today you would lose (4,054) from holding Nukkleus or give up 65.88% of portfolio value over 90 days.

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

Cisco Systems  vs.  Nukkleus

Cisco Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 12 (%) 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 February 2025.

Nukkleus

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nukkleus are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward-looking signals, Nukkleus disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Nukkleus

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

The idea behind Cisco Systems and Nukkleus 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.