Correlation Between Cisco Systems and ASTRAZENECA

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

By analyzing existing cross correlation between Cisco Systems and ASTRAZENECA PLC 4, you can compare the effects of market volatilities on Cisco Systems and ASTRAZENECA 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 ASTRAZENECA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and ASTRAZENECA.

Diversification Opportunities for Cisco Systems and ASTRAZENECA

-0.47

Correlation Coefficient

Cisco Systems  ASTRAZENECA

Very good diversification

The 3 months correlation between Cisco and ASTRAZENECA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ASTRAZENECA PLC 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASTRAZENECA PLC 4 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 ASTRAZENECA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASTRAZENECA PLC 4 has no effect on the direction of Cisco Systems i.e., Cisco Systems and ASTRAZENECA go up and down completely randomly.

Pair Corralation between Cisco Systems and ASTRAZENECA

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.15 times more return on investment than ASTRAZENECA. However, Cisco Systems is 1.15 times more volatile than ASTRAZENECA PLC 4. It trades about 0.28 of its potential returns per unit of risk. ASTRAZENECA PLC 4 is currently generating about -0.06 per unit of risk. If you would invest  4,968  in Cisco Systems on September 3, 2024 and sell it today you would earn a total of  975.00  from holding Cisco Systems or generate 19.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.19%
Values	Daily Returns

Cisco Systems  vs.  ASTRAZENECA PLC 4

Cisco Systems

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

ASTRAZENECA PLC 4

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASTRAZENECA PLC 4 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ASTRAZENECA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and ASTRAZENECA

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

The idea behind Cisco Systems and ASTRAZENECA PLC 4 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.