Correlation Between Cisco Systems and TG Venture

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

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

Diversification Opportunities for Cisco Systems and TG Venture

0.0

Correlation Coefficient

Cisco Systems  TG Venture

Pay attention - limited upside

The 3 months correlation between Cisco and TGVCW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and TG Venture Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TG Venture Acquisition 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 TG Venture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TG Venture Acquisition has no effect on the direction of Cisco Systems i.e., Cisco Systems and TG Venture go up and down completely randomly.

Pair Corralation between Cisco Systems and TG Venture

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.19 times more return on investment than TG Venture. However, Cisco Systems is 5.16 times less risky than TG Venture. It trades about 0.05 of its potential returns per unit of risk. TG Venture Acquisition is currently generating about -0.08 per unit of risk. If you would invest  4,466  in Cisco Systems on September 14, 2024 and sell it today you would earn a total of  1,396  from holding Cisco Systems or generate 31.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	28.48%
Values	Daily Returns

Cisco Systems  vs.  TG Venture Acquisition

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.

TG Venture Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TG Venture Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, TG Venture is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Cisco Systems and TG Venture

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

The idea behind Cisco Systems and TG Venture Acquisition 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..