Correlation Between Cisco Systems and AutoCanada
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and AutoCanada 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 AutoCanada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and AutoCanada, you can compare the effects of market volatilities on Cisco Systems and AutoCanada 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 AutoCanada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and AutoCanada.
Diversification Opportunities for Cisco Systems and AutoCanada
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and AutoCanada is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and AutoCanada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoCanada 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 AutoCanada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoCanada has no effect on the direction of Cisco Systems i.e., Cisco Systems and AutoCanada go up and down completely randomly.
Pair Corralation between Cisco Systems and AutoCanada
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.91 times less return on investment than AutoCanada. But when comparing it to its historical volatility, Cisco Systems is 1.9 times less risky than AutoCanada. It trades about 0.29 of its potential returns per unit of risk. AutoCanada is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 1,186 in AutoCanada on September 5, 2024 and sell it today you would earn a total of 143.00 from holding AutoCanada or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cisco Systems vs. AutoCanada
Performance |
| Timeline |
| Cisco Systems |
| AutoCanada |
Cisco Systems and AutoCanada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and AutoCanada
The main advantage of trading using opposite Cisco Systems and AutoCanada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, AutoCanada 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 AutoCanada will offset losses from the drop in AutoCanada's long position.| Cisco Systems vs. Cambium Networks Corp | Cisco Systems vs. Knowles Cor | Cisco Systems vs. Ituran Location and | Cisco Systems vs. ADTRAN Inc |
| AutoCanada vs. Arhaus Inc | AutoCanada vs. Floor Decor Holdings | AutoCanada vs. Live Ventures | AutoCanada vs. Cisco Systems |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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