Correlation Between Cisco Systems and Black Knight

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Black Knight 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 Black Knight into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Black Knight, you can compare the effects of market volatilities on Cisco Systems and Black Knight 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 Black Knight. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Black Knight.

Diversification Opportunities for Cisco Systems and Black Knight

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Cisco and Black is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Black Knight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Knight 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 Black Knight. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Knight has no effect on the direction of Cisco Systems i.e., Cisco Systems and Black Knight go up and down completely randomly.

Pair Corralation between Cisco Systems and Black Knight

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.35 times less return on investment than Black Knight. But when comparing it to its historical volatility, Cisco Systems is 1.26 times less risky than Black Knight. It trades about 0.03 of its potential returns per unit of risk. Black Knight is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,791  in Black Knight on February 17, 2024 and sell it today you would earn a total of  785.00  from holding Black Knight or generate 11.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy64.24%
ValuesDaily Returns

Cisco Systems  vs.  Black Knight

 Performance 
       Timeline  
Cisco Systems 

Risk-Adjusted Performance

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Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.
Black Knight 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Black Knight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Knight is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Cisco Systems and Black Knight Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Black Knight

The main advantage of trading using opposite Cisco Systems and Black Knight positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Black Knight 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 Black Knight will offset losses from the drop in Black Knight's long position.
The idea behind Cisco Systems and Black Knight 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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