Correlation Between Cisco Systems and Rinnai Corp

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

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

Diversification Opportunities for Cisco Systems and Rinnai Corp

0.7

Correlation Coefficient

Cisco Systems  Rinnai Corp

Poor diversification

The 3 months correlation between Cisco and Rinnai is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Rinnai Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rinnai 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 Rinnai Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rinnai Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Rinnai Corp go up and down completely randomly.

Pair Corralation between Cisco Systems and Rinnai Corp

If you would invest  5,750  in Cisco Systems on September 21, 2024 and sell it today you would earn a total of  98.00  from holding Cisco Systems or generate 1.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Cisco Systems  vs.  Rinnai 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.

Rinnai Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rinnai Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, Rinnai Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and Rinnai Corp

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

The idea behind Cisco Systems and Rinnai 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.