Correlation Between Unisys and Cisco Systems

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

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

Diversification Opportunities for Unisys and Cisco Systems

0.51

Correlation Coefficient

Unisys  Cisco Systems

Very weak diversification

The 3 months correlation between Unisys and Cisco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Unisys and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Unisys 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 Unisys are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Unisys i.e., Unisys and Cisco Systems go up and down completely randomly.

Pair Corralation between Unisys and Cisco Systems

Considering the 90-day investment horizon Unisys is expected to generate 2.32 times more return on investment than Cisco Systems. However, Unisys is 2.32 times more volatile than Cisco Systems. It trades about 0.2 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.06 per unit of risk. If you would invest  498.00  in Unisys on January 26, 2024 and sell it today you would earn a total of  56.00  from holding Unisys or generate 11.24% return on investment over 90 days.

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

Unisys  vs.  Cisco Systems

Unisys

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unisys 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 forward indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Unisys and Cisco Systems

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

The idea behind Unisys and Cisco Systems 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.