Correlation Between Cisco Systems and Partner Communications

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

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

Diversification Opportunities for Cisco Systems and Partner Communications

-0.82

Correlation Coefficient

Cisco Systems  Partner Communications

Pay attention - limited upside

The 3 months correlation between Cisco and Partner is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Partner Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partner Communications 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 Partner Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partner Communications has no effect on the direction of Cisco Systems i.e., Cisco Systems and Partner Communications go up and down completely randomly.

Pair Corralation between Cisco Systems and Partner Communications

If you would invest  5,064  in Cisco Systems on September 16, 2024 and sell it today you would earn a total of  798.00  from holding Cisco Systems or generate 15.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Cisco Systems  vs.  Partner Communications

Cisco Systems

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Partner Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cisco Systems and Partner Communications

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

The idea behind Cisco Systems and Partner Communications 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.