Correlation Between CACI International and Cisco Systems

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

By analyzing existing cross correlation between CACI International and Cisco Systems, you can compare the effects of market volatilities on CACI International and Cisco Systems 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 CACI International with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of CACI International and Cisco Systems.

Diversification Opportunities for CACI International and Cisco Systems

-0.61

Correlation Coefficient

CACI International  Cisco Systems

Excellent diversification

The 3 months correlation between CACI and Cisco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding CACI International and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and CACI International 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 CACI International are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of CACI International i.e., CACI International and Cisco Systems go up and down completely randomly.

Pair Corralation between CACI International and Cisco Systems

Given the investment horizon of 90 days CACI International is expected to generate 1.38 times more return on investment than Cisco Systems. However, CACI International is 1.38 times more volatile than Cisco Systems. It trades about 0.23 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.2 per unit of risk. If you would invest  37,498  in CACI International on January 31, 2024 and sell it today you would earn a total of  3,003  from holding CACI International or generate 8.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

CACI International  vs.  Cisco Systems

CACI International

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CACI International are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, CACI International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Cisco Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CACI International and Cisco Systems

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

The idea behind CACI International and Cisco Systems 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..