Correlation Between Cisco Systems and MicroSectorsTM Oil
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and MicroSectorsTM Oil 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 MicroSectorsTM Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on Cisco Systems and MicroSectorsTM Oil 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 MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and MicroSectorsTM Oil.
Diversification Opportunities for Cisco Systems and MicroSectorsTM Oil
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cisco and MicroSectorsTM is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas 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 MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of Cisco Systems i.e., Cisco Systems and MicroSectorsTM Oil go up and down completely randomly.
Pair Corralation between Cisco Systems and MicroSectorsTM Oil
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.49 times more return on investment than MicroSectorsTM Oil. However, Cisco Systems is 2.06 times less risky than MicroSectorsTM Oil. It trades about -0.06 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.24 per unit of risk. If you would invest 4,915 in Cisco Systems on January 26, 2024 and sell it today you would lose (80.00) from holding Cisco Systems or give up 1.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. MicroSectorsTM Oil Gas
Performance |
| Timeline |
| Cisco Systems |
| MicroSectorsTM Oil Gas |
Cisco Systems and MicroSectorsTM Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and MicroSectorsTM Oil
The main advantage of trading using opposite Cisco Systems and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.The idea behind Cisco Systems and MicroSectorsTM Oil Gas 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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