Correlation Between Cisco Systems and United Parcel
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and United Parcel 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 United Parcel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and United Parcel Service, you can compare the effects of market volatilities on Cisco Systems and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and United Parcel.
Diversification Opportunities for Cisco Systems and United Parcel
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Cisco and United is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Cisco Systems i.e., Cisco Systems and United Parcel go up and down completely randomly.
Pair Corralation between Cisco Systems and United Parcel
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.91 times more return on investment than United Parcel. However, Cisco Systems is 1.1 times less risky than United Parcel. It trades about 0.01 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.01 per unit of risk. If you would invest 4,626 in Cisco Systems on January 26, 2024 and sell it today you would earn a total of 209.00 from holding Cisco Systems or generate 4.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Cisco Systems vs. United Parcel Service
Performance |
Timeline |
Cisco Systems |
United Parcel Service |
Cisco Systems and United Parcel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cisco Systems and United Parcel
The main advantage of trading using opposite Cisco Systems and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.Cisco Systems vs. Aviat Networks | Cisco Systems vs. Silicom | Cisco Systems vs. Akoustis Technologies | Cisco Systems vs. Gilat Satellite Networks |
United Parcel vs. JB Hunt Transport | United Parcel vs. Aquagold International | United Parcel vs. Thrivent High Yield | United Parcel vs. Morningstar Unconstrained Allocation |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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