Correlation Between Cisco Systems and Sa Real

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

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

Diversification Opportunities for Cisco Systems and Sa Real

0.33

Correlation Coefficient

Cisco Systems  Sa Real

Weak diversification

The 3 months correlation between Cisco and SAREX is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Sa Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sa Real Estate 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 Sa Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sa Real Estate has no effect on the direction of Cisco Systems i.e., Cisco Systems and Sa Real go up and down completely randomly.

Pair Corralation between Cisco Systems and Sa Real

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.88 times more return on investment than Sa Real. However, Cisco Systems is 1.14 times less risky than Sa Real. It trades about -0.09 of its potential returns per unit of risk. Sa Real Estate is currently generating about -0.16 per unit of risk. If you would invest  4,928  in Cisco Systems on January 24, 2024 and sell it today you would lose (114.00) from holding Cisco Systems or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Cisco Systems  vs.  Sa Real Estate

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

Sa Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cisco Systems and Sa Real

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

The idea behind Cisco Systems and Sa Real Estate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.