Correlation Between ZTE Corp-H and Cisco Systems

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

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

Diversification Opportunities for ZTE Corp-H and Cisco Systems

-0.34

Correlation Coefficient

ZTE Corp-H  Cisco Systems

Very good diversification

The 3 months correlation between ZTE and Cisco is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ZTE Corp H and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and ZTE Corp-H 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 ZTE Corp H 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 ZTE Corp-H i.e., ZTE Corp-H and Cisco Systems go up and down completely randomly.

Pair Corralation between ZTE Corp-H and Cisco Systems

Assuming the 90 days horizon ZTE Corp H is expected to generate 3.17 times more return on investment than Cisco Systems. However, ZTE Corp-H is 3.17 times more volatile than Cisco Systems. It trades about 0.03 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.1 per unit of risk. If you would invest  181.00  in ZTE Corp H on January 25, 2024 and sell it today you would earn a total of  7.00  from holding ZTE Corp H or generate 3.87% return on investment over 90 days.

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

ZTE Corp H  vs.  Cisco Systems

ZTE Corp H

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ZTE Corp H are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, ZTE Corp-H may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 unfluctuating 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 ZTE Corp-H and Cisco Systems

The main advantage of trading using opposite ZTE Corp-H and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZTE Corp-H 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 ZTE Corp H 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.