Correlation Between Cisco Systems and Ideanomics

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

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

Diversification Opportunities for Cisco Systems and Ideanomics

0.27

Correlation Coefficient

Cisco Systems  Ideanomics

Modest diversification

The 3 months correlation between Cisco and Ideanomics is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Ideanomics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ideanomics 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 Ideanomics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ideanomics has no effect on the direction of Cisco Systems i.e., Cisco Systems and Ideanomics go up and down completely randomly.

Pair Corralation between Cisco Systems and Ideanomics

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.17 times more return on investment than Ideanomics. However, Cisco Systems is 5.83 times less risky than Ideanomics. It trades about 0.01 of its potential returns per unit of risk. Ideanomics is currently generating about -0.07 per unit of risk. If you would invest  4,652  in Cisco Systems on January 25, 2024 and sell it today you would earn a total of  180.99  from holding Cisco Systems or generate 3.89% 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.  Ideanomics

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 latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ideanomics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cisco Systems and Ideanomics

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

The idea behind Cisco Systems and Ideanomics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.