Correlation Between Cisco Systems and CROWN

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

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

Diversification Opportunities for Cisco Systems and CROWN

-0.17

Correlation Coefficient

Cisco Systems  CROWN

Good diversification

The 3 months correlation between Cisco and CROWN is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and CROWN CASTLE INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CROWN CASTLE INTL 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 CROWN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CROWN CASTLE INTL has no effect on the direction of Cisco Systems i.e., Cisco Systems and CROWN go up and down completely randomly.

Pair Corralation between Cisco Systems and CROWN

Given the investment horizon of 90 days Cisco Systems is expected to under-perform the CROWN. In addition to that, Cisco Systems is 5.94 times more volatile than CROWN CASTLE INTL. It trades about -0.03 of its total potential returns per unit of risk. CROWN CASTLE INTL is currently generating about -0.06 per unit of volatility. If you would invest  9,721  in CROWN CASTLE INTL on October 4, 2024 and sell it today you would lose (17.00) from holding CROWN CASTLE INTL or give up 0.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cisco Systems  vs.  CROWN CASTLE INTL

Cisco Systems

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CROWN CASTLE INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CROWN CASTLE INTL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CROWN 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 CROWN

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

The idea behind Cisco Systems and CROWN CASTLE INTL 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.