Correlation Between Cisco Systems and Hewlett Packard
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Hewlett Packard 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 Hewlett Packard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Hewlett Packard Enterprise, you can compare the effects of market volatilities on Cisco Systems and Hewlett Packard 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 Hewlett Packard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Hewlett Packard.
Diversification Opportunities for Cisco Systems and Hewlett Packard
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cisco and Hewlett is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Hewlett Packard Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hewlett Packard Ente 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 Hewlett Packard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hewlett Packard Ente has no effect on the direction of Cisco Systems i.e., Cisco Systems and Hewlett Packard go up and down completely randomly.
Pair Corralation between Cisco Systems and Hewlett Packard
Assuming the 90 days trading horizon Cisco Systems is expected to generate 0.41 times more return on investment than Hewlett Packard. However, Cisco Systems is 2.41 times less risky than Hewlett Packard. It trades about 0.24 of its potential returns per unit of risk. Hewlett Packard Enterprise is currently generating about 0.08 per unit of risk. If you would invest 4,467 in Cisco Systems on November 2, 2024 and sell it today you would earn a total of 1,383 from holding Cisco Systems or generate 30.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Hewlett Packard Enterprise
Performance |
| Timeline |
| Cisco Systems |
| Hewlett Packard Ente |
Cisco Systems and Hewlett Packard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Hewlett Packard
The main advantage of trading using opposite Cisco Systems and Hewlett Packard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Hewlett Packard 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 Hewlett Packard will offset losses from the drop in Hewlett Packard's long position.| Cisco Systems vs. Aya Gold Silver | Cisco Systems vs. Globex Mining Enterprises | Cisco Systems vs. GALENA MINING LTD | Cisco Systems vs. MCEWEN MINING INC |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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