Correlation Between Cisco Systems and China TowerLimited
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and China TowerLimited 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 China TowerLimited into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and China Tower, you can compare the effects of market volatilities on Cisco Systems and China TowerLimited 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 China TowerLimited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and China TowerLimited.
Diversification Opportunities for Cisco Systems and China TowerLimited
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and China is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and China Tower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China TowerLimited 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 China TowerLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China TowerLimited has no effect on the direction of Cisco Systems i.e., Cisco Systems and China TowerLimited go up and down completely randomly.
Pair Corralation between Cisco Systems and China TowerLimited
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.32 times more return on investment than China TowerLimited. However, Cisco Systems is 3.09 times less risky than China TowerLimited. It trades about 0.21 of its potential returns per unit of risk. China Tower is currently generating about 0.02 per unit of risk. If you would invest 5,574 in Cisco Systems on August 26, 2024 and sell it today you would earn a total of 281.00 from holding Cisco Systems or generate 5.04% 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. China Tower
Performance |
| Timeline |
| Cisco Systems |
| China TowerLimited |
Cisco Systems and China TowerLimited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and China TowerLimited
The main advantage of trading using opposite Cisco Systems and China TowerLimited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, China TowerLimited 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 China TowerLimited will offset losses from the drop in China TowerLimited's long position.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
| China TowerLimited vs. Singapore Telecommunications Limited | China TowerLimited vs. Vodafone Group PLC | China TowerLimited vs. PT Indosat Tbk | China TowerLimited vs. KDDI 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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