Correlation Between Cisco Systems and Carbon Streaming

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

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

Diversification Opportunities for Cisco Systems and Carbon Streaming

-0.77

Correlation Coefficient

Cisco Systems  Carbon Streaming

Pay attention - limited upside

The 3 months correlation between Cisco and Carbon is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Carbon Streaming Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Streaming Corp 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 Carbon Streaming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Streaming Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Carbon Streaming go up and down completely randomly.

Pair Corralation between Cisco Systems and Carbon Streaming

Given the investment horizon of 90 days Cisco Systems is expected to generate 4.61 times less return on investment than Carbon Streaming. But when comparing it to its historical volatility, Cisco Systems is 5.16 times less risky than Carbon Streaming. It trades about 0.1 of its potential returns per unit of risk. Carbon Streaming Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Carbon Streaming Corp on September 21, 2024 and sell it today you would earn a total of  2.00  from holding Carbon Streaming Corp or generate 6.45% 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.  Carbon Streaming Corp

Cisco Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Carbon Streaming Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carbon Streaming Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Carbon Streaming is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cisco Systems and Carbon Streaming

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

The idea behind Cisco Systems and Carbon Streaming Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.