Correlation Between Cisco Systems and Africa Oil
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Africa Oil 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 Africa Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Africa Oil Corp, you can compare the effects of market volatilities on Cisco Systems and Africa Oil 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 Africa Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Africa Oil.
Diversification Opportunities for Cisco Systems and Africa Oil
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and Africa is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Africa Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Oil Corp 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 Africa Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Oil Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Africa Oil go up and down completely randomly.
Pair Corralation between Cisco Systems and Africa Oil
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.54 times more return on investment than Africa Oil. However, Cisco Systems is 1.87 times less risky than Africa Oil. It trades about 0.05 of its potential returns per unit of risk. Africa Oil Corp is currently generating about -0.01 per unit of risk. If you would invest 4,603 in Cisco Systems on August 29, 2024 and sell it today you would earn a total of 1,356 from holding Cisco Systems or generate 29.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Africa Oil Corp
Performance |
| Timeline |
| Cisco Systems |
| Africa Oil Corp |
Cisco Systems and Africa Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Africa Oil
The main advantage of trading using opposite Cisco Systems and Africa Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Africa Oil 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 Africa Oil will offset losses from the drop in Africa Oil's long position.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
| Africa Oil vs. Gear Energy | Africa Oil vs. Tamarack Valley Energy | Africa Oil vs. MEG Energy Corp | Africa Oil vs. Cardinal Energy |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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