Correlation Between Cisco Systems and Babcock International
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Babcock International 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 Babcock International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Babcock International Group, you can compare the effects of market volatilities on Cisco Systems and Babcock International 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 Babcock International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Babcock International.
Diversification Opportunities for Cisco Systems and Babcock International
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and Babcock is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Babcock International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Babcock International 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 Babcock International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Babcock International has no effect on the direction of Cisco Systems i.e., Cisco Systems and Babcock International go up and down completely randomly.
Pair Corralation between Cisco Systems and Babcock International
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.64 times less return on investment than Babcock International. But when comparing it to its historical volatility, Cisco Systems is 2.52 times less risky than Babcock International. It trades about 0.09 of its potential returns per unit of risk. Babcock International Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 482.00 in Babcock International Group on September 2, 2024 and sell it today you would earn a total of 176.00 from holding Babcock International Group or generate 36.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Cisco Systems vs. Babcock International Group
Performance |
| Timeline |
| Cisco Systems |
| Babcock International |
Cisco Systems and Babcock International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Babcock International
The main advantage of trading using opposite Cisco Systems and Babcock International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Babcock International 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 Babcock International will offset losses from the drop in Babcock International's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Babcock International vs. Orion Group Holdings | Babcock International vs. Agrify Corp | Babcock International vs. Matrix Service Co | Babcock International vs. MYR Group |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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