Correlation Between Cisco Systems and Direxion
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Direxion 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 Direxion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Direxion, you can compare the effects of market volatilities on Cisco Systems and Direxion 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 Direxion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Direxion.
Diversification Opportunities for Cisco Systems and Direxion
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and Direxion is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Cisco Systems i.e., Cisco Systems and Direxion go up and down completely randomly.
Pair Corralation between Cisco Systems and Direxion
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.61 times more return on investment than Direxion. However, Cisco Systems is 1.61 times more volatile than Direxion. It trades about 0.04 of its potential returns per unit of risk. Direxion is currently generating about -0.01 per unit of risk. If you would invest 4,635 in Cisco Systems on August 26, 2024 and sell it today you would earn a total of 1,220 from holding Cisco Systems or generate 26.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 19.32% |
| Values | Daily Returns |
Cisco Systems vs. Direxion
Performance |
| Timeline |
| Cisco Systems |
| Direxion |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cisco Systems and Direxion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Direxion
The main advantage of trading using opposite Cisco Systems and Direxion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Direxion 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 Direxion will offset losses from the drop in Direxion's long position.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
| Direxion vs. Blackrock Muniholdings Ny | Direxion vs. MFS Investment Grade | Direxion vs. Eaton Vance National | Direxion vs. Invesco High Income |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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