Correlation Between Bed Bath and Cisco Systems

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

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

Diversification Opportunities for Bed Bath and Cisco Systems

0.41

Correlation Coefficient

Bed Bath  Cisco Systems

Very weak diversification

The 3 months correlation between Bed and Cisco is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Bed Bath 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 Bed Bath Beyond 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 Bed Bath i.e., Bed Bath and Cisco Systems go up and down completely randomly.

Pair Corralation between Bed Bath and Cisco Systems

If you would invest  30.00  in Bed Bath Beyond on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Bed Bath Beyond or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

Bed Bath Beyond  vs.  Cisco Systems

Bed Bath Beyond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bed Bath Beyond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Bed Bath is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bed Bath and Cisco Systems

The main advantage of trading using opposite Bed Bath and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bed Bath 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 Bed Bath Beyond 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.