Correlation Between Cisco Systems and AXT
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and AXT 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 AXT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and AXT Inc, you can compare the effects of market volatilities on Cisco Systems and AXT 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 AXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and AXT.
Diversification Opportunities for Cisco Systems and AXT
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cisco and AXT is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc 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 AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Cisco Systems i.e., Cisco Systems and AXT go up and down completely randomly.
Pair Corralation between Cisco Systems and AXT
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.31 times more return on investment than AXT. However, Cisco Systems is 3.18 times less risky than AXT. It trades about 0.12 of its potential returns per unit of risk. AXT Inc is currently generating about -0.07 per unit of risk. If you would invest 5,877 in Cisco Systems on November 5, 2024 and sell it today you would earn a total of 183.00 from holding Cisco Systems or generate 3.11% 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. AXT Inc
Performance |
| Timeline |
| Cisco Systems |
| AXT Inc |
Cisco Systems and AXT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and AXT
The main advantage of trading using opposite Cisco Systems and AXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, AXT 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 AXT will offset losses from the drop in AXT's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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