Correlation Between Cisco Systems and PetIQ

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

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

Diversification Opportunities for Cisco Systems and PetIQ

0.78

Correlation Coefficient

Cisco Systems  PetIQ

Poor diversification

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

Pair Corralation between Cisco Systems and PetIQ

Given the investment horizon of 90 days Cisco Systems is expected to generate 18.81 times more return on investment than PetIQ. However, Cisco Systems is 18.81 times more volatile than PetIQ Inc. It trades about 0.19 of its potential returns per unit of risk. PetIQ Inc is currently generating about 0.41 per unit of risk. If you would invest  5,275  in Cisco Systems on October 4, 2024 and sell it today you would earn a total of  645.00  from holding Cisco Systems or generate 12.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.4%
Values	Daily Returns

Cisco Systems  vs.  PetIQ Inc

Cisco Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 14 (%) 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.

PetIQ Inc

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days PetIQ Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PetIQ is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cisco Systems and PetIQ

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

The idea behind Cisco Systems and PetIQ Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..