Correlation Between Cisco Systems and Avantis Small
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Avantis Small 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 Avantis Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Avantis Small Cap, you can compare the effects of market volatilities on Cisco Systems and Avantis Small 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 Avantis Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Avantis Small.
Diversification Opportunities for Cisco Systems and Avantis Small
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and Avantis is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap 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 Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Cisco Systems i.e., Cisco Systems and Avantis Small go up and down completely randomly.
Pair Corralation between Cisco Systems and Avantis Small
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.36 times less return on investment than Avantis Small. But when comparing it to its historical volatility, Cisco Systems is 1.11 times less risky than Avantis Small. It trades about 0.05 of its potential returns per unit of risk. Avantis Small Cap is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 7,305 in Avantis Small Cap on August 30, 2024 and sell it today you would earn a total of 3,223 from holding Avantis Small Cap or generate 44.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Avantis Small Cap
Performance |
| Timeline |
| Cisco Systems |
| Avantis Small Cap |
Cisco Systems and Avantis Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Avantis Small
The main advantage of trading using opposite Cisco Systems and Avantis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Avantis Small 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 Avantis Small will offset losses from the drop in Avantis Small's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Avantis Small vs. Dimensional ETF Trust | Avantis Small vs. Vanguard Small Cap Index | Avantis Small vs. First Trust Multi Manager | Avantis Small vs. Vanguard SP Small Cap |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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