Correlation Between Cisco Systems and ProShares UltraShort

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

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

Diversification Opportunities for Cisco Systems and ProShares UltraShort

-0.75

Correlation Coefficient

Cisco Systems  ProShares UltraShort

Pay attention - limited upside

The 3 months correlation between Cisco and ProShares is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ProShares UltraShort Semicondu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Cisco Systems i.e., Cisco Systems and ProShares UltraShort go up and down completely randomly.

Pair Corralation between Cisco Systems and ProShares UltraShort

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.23 times more return on investment than ProShares UltraShort. However, Cisco Systems is 4.31 times less risky than ProShares UltraShort. It trades about 0.1 of its potential returns per unit of risk. ProShares UltraShort Semiconductors is currently generating about 0.02 per unit of risk. If you would invest  5,750  in Cisco Systems on September 21, 2024 and sell it today you would earn a total of  102.00  from holding Cisco Systems or generate 1.77% 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.  ProShares UltraShort Semicondu

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.

ProShares UltraShort

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares UltraShort Semiconductors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Etf's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the Exchange Traded Fund stockholders.

Pair Trading with Cisco Systems and ProShares UltraShort

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

The idea behind Cisco Systems and ProShares UltraShort Semiconductors 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.