Correlation Between Cisco Systems and Bel Fuse
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Bel Fuse 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 Bel Fuse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Bel Fuse B, you can compare the effects of market volatilities on Cisco Systems and Bel Fuse 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 Bel Fuse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Bel Fuse.
Diversification Opportunities for Cisco Systems and Bel Fuse
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Bel is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Bel Fuse B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bel Fuse B 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 Bel Fuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bel Fuse B has no effect on the direction of Cisco Systems i.e., Cisco Systems and Bel Fuse go up and down completely randomly.
Pair Corralation between Cisco Systems and Bel Fuse
Given the investment horizon of 90 days Cisco Systems is expected to generate 3.97 times less return on investment than Bel Fuse. But when comparing it to its historical volatility, Cisco Systems is 2.66 times less risky than Bel Fuse. It trades about 0.04 of its potential returns per unit of risk. Bel Fuse B is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,506 in Bel Fuse B on August 24, 2024 and sell it today you would earn a total of 4,209 from holding Bel Fuse B or generate 120.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Bel Fuse B
Performance |
| Timeline |
| Cisco Systems |
| Bel Fuse B |
Cisco Systems and Bel Fuse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Bel Fuse
The main advantage of trading using opposite Cisco Systems and Bel Fuse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Bel Fuse 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 Bel Fuse will offset losses from the drop in Bel Fuse's long position.| Cisco Systems vs. Eshallgo Class A | Cisco Systems vs. Amtech Systems | Cisco Systems vs. Gold Fields Ltd | Cisco Systems vs. Aegean Airlines SA |
| Bel Fuse vs. Benchmark Electronics | Bel Fuse vs. Methode Electronics | Bel Fuse vs. Richardson Electronics | Bel Fuse vs. Plexus 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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