Correlation Between Cisco Systems and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Marathon Oil 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 Marathon Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Marathon Oil, you can compare the effects of market volatilities on Cisco Systems and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Marathon Oil.
Diversification Opportunities for Cisco Systems and Marathon Oil
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and Marathon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Cisco Systems i.e., Cisco Systems and Marathon Oil go up and down completely randomly.
Pair Corralation between Cisco Systems and Marathon Oil
Given the investment horizon of 90 days Cisco Systems is expected to generate 4.38 times less return on investment than Marathon Oil. But when comparing it to its historical volatility, Cisco Systems is 1.25 times less risky than Marathon Oil. It trades about 0.18 of its potential returns per unit of risk. Marathon Oil is currently generating about 0.63 of returns per unit of risk over similar time horizon. If you would invest 2,429 in Marathon Oil on December 29, 2023 and sell it today you would earn a total of 342.00 from holding Marathon Oil or generate 14.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Cisco Systems vs. Marathon Oil
Performance |
Timeline |
Cisco Systems |
Marathon Oil |
Cisco Systems and Marathon Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cisco Systems and Marathon Oil
The main advantage of trading using opposite Cisco Systems and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.Cisco Systems vs. Desktop Metal | Cisco Systems vs. Fabrinet | Cisco Systems vs. Kimball Electronics | Cisco Systems vs. Knowles Cor |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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