Correlation Between Cisco Systems and DANAHER

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

By analyzing existing cross correlation between Cisco Systems and DANAHER P 4375, you can compare the effects of market volatilities on Cisco Systems and DANAHER 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 DANAHER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and DANAHER.

Diversification Opportunities for Cisco Systems and DANAHER

-0.2

Correlation Coefficient

Cisco Systems  DANAHER

Good diversification

The 3 months correlation between Cisco and DANAHER is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and DANAHER P 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DANAHER P 4375 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 DANAHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DANAHER P 4375 has no effect on the direction of Cisco Systems i.e., Cisco Systems and DANAHER go up and down completely randomly.

Pair Corralation between Cisco Systems and DANAHER

Given the investment horizon of 90 days Cisco Systems is expected to generate 141.84 times less return on investment than DANAHER. But when comparing it to its historical volatility, Cisco Systems is 83.5 times less risky than DANAHER. It trades about 0.05 of its potential returns per unit of risk. DANAHER P 4375 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  9,420  in DANAHER P 4375 on October 23, 2024 and sell it today you would lose (46.00) from holding DANAHER P 4375 or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	40.69%
Values	Daily Returns

Cisco Systems  vs.  DANAHER P 4375

Cisco Systems

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 11 (%) 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.

DANAHER P 4375

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DANAHER P 4375 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DANAHER sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and DANAHER

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

The idea behind Cisco Systems and DANAHER P 4375 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.