Correlation Between Cisco Systems and Ciena Corp
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Ciena Corp 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 Ciena Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Ciena Corp, you can compare the effects of market volatilities on Cisco Systems and Ciena Corp 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 Ciena Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Ciena Corp.
Diversification Opportunities for Cisco Systems and Ciena Corp
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Ciena is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Ciena Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ciena Corp 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 Ciena Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ciena Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Ciena Corp go up and down completely randomly.
Pair Corralation between Cisco Systems and Ciena Corp
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.25 times more return on investment than Ciena Corp. However, Cisco Systems is 4.05 times less risky than Ciena Corp. It trades about 0.12 of its potential returns per unit of risk. Ciena Corp is currently generating about 0.01 per unit of risk. If you would invest 5,870 in Cisco Systems on November 2, 2024 and sell it today you would earn a total of 177.00 from holding Cisco Systems or generate 3.02% 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. Ciena Corp
Performance |
| Timeline |
| Cisco Systems |
| Ciena Corp |
Cisco Systems and Ciena Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Ciena Corp
The main advantage of trading using opposite Cisco Systems and Ciena Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Ciena Corp 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 Ciena Corp will offset losses from the drop in Ciena Corp's long position.| Cisco Systems vs. Comtech Telecommunications Corp | Cisco Systems vs. Silicom | Cisco Systems vs. Knowles Cor | Cisco Systems vs. Mynaric AG ADR |
| Ciena Corp vs. Extreme Networks | Ciena Corp vs. Hewlett Packard Enterprise | Ciena Corp vs. NETGEAR | Ciena Corp vs. Motorola Solutions |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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