Correlation Between Cisco Systems and Desktop Metal
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Desktop Metal 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 Desktop Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Desktop Metal, you can compare the effects of market volatilities on Cisco Systems and Desktop Metal 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 Desktop Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Desktop Metal.
Diversification Opportunities for Cisco Systems and Desktop Metal
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and Desktop is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Desktop Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Desktop Metal 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 Desktop Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Desktop Metal has no effect on the direction of Cisco Systems i.e., Cisco Systems and Desktop Metal go up and down completely randomly.
Pair Corralation between Cisco Systems and Desktop Metal
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.22 times more return on investment than Desktop Metal. However, Cisco Systems is 4.63 times less risky than Desktop Metal. It trades about 0.07 of its potential returns per unit of risk. Desktop Metal is currently generating about -0.06 per unit of risk. If you would invest 4,361 in Cisco Systems on September 25, 2024 and sell it today you would earn a total of 1,622 from holding Cisco Systems or generate 37.19% 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. Desktop Metal
Performance |
| Timeline |
| Cisco Systems |
| Desktop Metal |
Cisco Systems and Desktop Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Desktop Metal
The main advantage of trading using opposite Cisco Systems and Desktop Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Desktop Metal 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 Desktop Metal will offset losses from the drop in Desktop Metal's long position.| Cisco Systems vs. Desktop Metal | Cisco Systems vs. Fabrinet | Cisco Systems vs. Kimball Electronics | Cisco Systems vs. Knowles Cor |
| Desktop Metal vs. Rigetti Computing | Desktop Metal vs. Quantum Computing | Desktop Metal vs. IONQ Inc | Desktop Metal vs. Quantum |
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 Stocks Directory module to find actively traded stocks across global markets.
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