Correlation Between Cisco Systems and 23Andme Holding

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and 23Andme Holding 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 23Andme Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and 23Andme Holding Co, you can compare the effects of market volatilities on Cisco Systems and 23Andme Holding 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 23Andme Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and 23Andme Holding.

Diversification Opportunities for Cisco Systems and 23Andme Holding

0.41

Correlation Coefficient

Cisco Systems  23Andme Holding

Very weak diversification

The 3 months correlation between Cisco and 23Andme is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and 23Andme Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 23Andme Holding 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 23Andme Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 23Andme Holding has no effect on the direction of Cisco Systems i.e., Cisco Systems and 23Andme Holding go up and down completely randomly.

Pair Corralation between Cisco Systems and 23Andme Holding

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.21 times more return on investment than 23Andme Holding. However, Cisco Systems is 4.87 times less risky than 23Andme Holding. It trades about -0.08 of its potential returns per unit of risk. 23Andme Holding Co is currently generating about -0.19 per unit of risk. If you would invest  4,915  in Cisco Systems on January 20, 2024 and sell it today you would lose (104.00) from holding Cisco Systems or give up 2.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Cisco Systems  vs.  23Andme Holding Co

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.

23Andme Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 23Andme Holding Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cisco Systems and 23Andme Holding

The main advantage of trading using opposite Cisco Systems and 23Andme Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, 23Andme Holding 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 23Andme Holding will offset losses from the drop in 23Andme Holding's long position.

The idea behind Cisco Systems and 23Andme Holding Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.