Correlation Between Cisco Systems and 482480AG5

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and 482480AG5 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 482480AG5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and KLA TENCOR PORATION, you can compare the effects of market volatilities on Cisco Systems and 482480AG5 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 482480AG5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and 482480AG5.

Diversification Opportunities for Cisco Systems and 482480AG5

0.08

Correlation Coefficient

Cisco Systems  482480AG5

Significant diversification

The 3 months correlation between Cisco and 482480AG5 is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and KLA TENCOR PORATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA TENCOR PORATION 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 482480AG5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA TENCOR PORATION has no effect on the direction of Cisco Systems i.e., Cisco Systems and 482480AG5 go up and down completely randomly.

Pair Corralation between Cisco Systems and 482480AG5

Given the investment horizon of 90 days Cisco Systems is expected to generate 3.57 times more return on investment than 482480AG5. However, Cisco Systems is 3.57 times more volatile than KLA TENCOR PORATION. It trades about 0.13 of its potential returns per unit of risk. KLA TENCOR PORATION is currently generating about -0.04 per unit of risk. If you would invest  5,881  in Cisco Systems on November 29, 2024 and sell it today you would earn a total of  500.00  from holding Cisco Systems or generate 8.5% return on investment over 90 days.

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

Cisco Systems  vs.  KLA TENCOR PORATION

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 10 (%) 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 March 2025.

KLA TENCOR PORATION

Risk-Adjusted Performance

Very Weak

Over the last 90 days KLA TENCOR PORATION has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 482480AG5 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 482480AG5

The main advantage of trading using opposite Cisco Systems and 482480AG5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, 482480AG5 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 482480AG5 will offset losses from the drop in 482480AG5's long position.

The idea behind Cisco Systems and KLA TENCOR PORATION 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.