Correlation Between Applied Opt and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both Applied Opt 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 Applied Opt and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Opt and Cisco Systems, you can compare the effects of market volatilities on Applied Opt 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 Applied Opt with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Opt and Cisco Systems.
Diversification Opportunities for Applied Opt and Cisco Systems
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and Cisco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Applied Opt and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Applied Opt 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 Applied Opt 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 Applied Opt i.e., Applied Opt and Cisco Systems go up and down completely randomly.
Pair Corralation between Applied Opt and Cisco Systems
Given the investment horizon of 90 days Applied Opt is expected to generate 12.14 times more return on investment than Cisco Systems. However, Applied Opt is 12.14 times more volatile than Cisco Systems. It trades about 0.31 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.1 per unit of risk. If you would invest 1,701 in Applied Opt on August 24, 2024 and sell it today you would earn a total of 1,849 from holding Applied Opt or generate 108.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Opt vs. Cisco Systems
Performance |
| Timeline |
| Applied Opt |
| Cisco Systems |
Applied Opt and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Opt and Cisco Systems
The main advantage of trading using opposite Applied Opt and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Opt 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.| Applied Opt vs. Lumentum Holdings | Applied Opt vs. Ichor Holdings | Applied Opt vs. Fabrinet | Applied Opt vs. Hello Group |
| Cisco Systems vs. Eshallgo Class A | Cisco Systems vs. Amtech Systems | Cisco Systems vs. Gold Fields Ltd | Cisco Systems vs. Aegean Airlines SA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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