Correlation Between Cisco Systems and Silk Road

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

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

Diversification Opportunities for Cisco Systems and Silk Road

0.62

Correlation Coefficient

Cisco Systems  Silk Road

Poor diversification

The 3 months correlation between Cisco and Silk is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Silk Road Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silk Road Medical 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 Silk Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silk Road Medical has no effect on the direction of Cisco Systems i.e., Cisco Systems and Silk Road go up and down completely randomly.

Pair Corralation between Cisco Systems and Silk Road

If you would invest  2,749  in Silk Road Medical on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Silk Road Medical or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	5.0%
Values	Daily Returns

Cisco Systems  vs.  Silk Road Medical

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 inconsistent fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Silk Road Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Silk Road Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Silk Road is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Cisco Systems and Silk Road

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

The idea behind Cisco Systems and Silk Road Medical 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.