Correlation Between Cisco Systems and American Funds
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and American Funds 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 American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and American Funds 2050, you can compare the effects of market volatilities on Cisco Systems and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and American Funds.
Diversification Opportunities for Cisco Systems and American Funds
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and American is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and American Funds 2050 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2050 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2050 has no effect on the direction of Cisco Systems i.e., Cisco Systems and American Funds go up and down completely randomly.
Pair Corralation between Cisco Systems and American Funds
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.72 times more return on investment than American Funds. However, Cisco Systems is 1.72 times more volatile than American Funds 2050. It trades about 0.27 of its potential returns per unit of risk. American Funds 2050 is currently generating about 0.1 per unit of risk. If you would invest 5,528 in Cisco Systems on August 29, 2024 and sell it today you would earn a total of 380.50 from holding Cisco Systems or generate 6.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. American Funds 2050
Performance |
| Timeline |
| Cisco Systems |
| American Funds 2050 |
Cisco Systems and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and American Funds
The main advantage of trading using opposite Cisco Systems and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Cisco Systems vs. NETGEAR | Cisco Systems vs. Clearfield | Cisco Systems vs. ABIVAX Socit Anonyme | Cisco Systems vs. Morningstar Unconstrained Allocation |
| American Funds vs. Kinetics Global Fund | American Funds vs. T Rowe Price | American Funds vs. Artisan Global Unconstrained | American Funds vs. Dreyfusstandish Global Fixed |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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