Correlation Between Vertex Energy and Cisco Systems

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

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

Diversification Opportunities for Vertex Energy and Cisco Systems

0.19

Correlation Coefficient

Vertex Energy  Cisco Systems

Average diversification

The 3 months correlation between Vertex and Cisco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Energy and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Vertex Energy 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 Vertex Energy 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 Vertex Energy i.e., Vertex Energy and Cisco Systems go up and down completely randomly.

Pair Corralation between Vertex Energy and Cisco Systems

Given the investment horizon of 90 days Vertex Energy is expected to generate 7.74 times more return on investment than Cisco Systems. However, Vertex Energy is 7.74 times more volatile than Cisco Systems. It trades about 0.18 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.06 per unit of risk. If you would invest  128.00  in Vertex Energy on January 26, 2024 and sell it today you would earn a total of  40.00  from holding Vertex Energy or generate 31.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Vertex Energy  vs.  Cisco Systems

Vertex Energy

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Vertex Energy reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain 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 Vertex Energy and Cisco Systems

The main advantage of trading using opposite Vertex Energy and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertex Energy 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 Vertex Energy 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.