Correlation Between Cisco Systems and PT Bank
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and PT Bank 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 PT Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and PT Bank Rakyat, you can compare the effects of market volatilities on Cisco Systems and PT Bank 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 PT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and PT Bank.
Diversification Opportunities for Cisco Systems and PT Bank
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and BKRKF is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and PT Bank Rakyat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Rakyat 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Rakyat has no effect on the direction of Cisco Systems i.e., Cisco Systems and PT Bank go up and down completely randomly.
Pair Corralation between Cisco Systems and PT Bank
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.22 times more return on investment than PT Bank. However, Cisco Systems is 4.54 times less risky than PT Bank. It trades about 0.21 of its potential returns per unit of risk. PT Bank Rakyat is currently generating about -0.02 per unit of risk. If you would invest 5,036 in Cisco Systems on August 23, 2024 and sell it today you would earn a total of 720.00 from holding Cisco Systems or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. PT Bank Rakyat
Performance |
| Timeline |
| Cisco Systems |
| PT Bank Rakyat |
Cisco Systems and PT Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and PT Bank
The main advantage of trading using opposite Cisco Systems and PT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, PT Bank 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 PT Bank will offset losses from the drop in PT Bank's long position.| Cisco Systems vs. NETGEAR | Cisco Systems vs. Small Cap Core | Cisco Systems vs. Morningstar Unconstrained Allocation | Cisco Systems vs. Mutual Of America |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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