Correlation Between Cisco Systems and Enbridge
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Enbridge 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 Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Enbridge, you can compare the effects of market volatilities on Cisco Systems and Enbridge 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 Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Enbridge.
Diversification Opportunities for Cisco Systems and Enbridge
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Enbridge is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge 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 Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Cisco Systems i.e., Cisco Systems and Enbridge go up and down completely randomly.
Pair Corralation between Cisco Systems and Enbridge
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.44 times more return on investment than Enbridge. However, Cisco Systems is 1.44 times more volatile than Enbridge. It trades about 0.27 of its potential returns per unit of risk. Enbridge is currently generating about 0.15 per unit of risk. If you would invest 4,923 in Cisco Systems on September 12, 2024 and sell it today you would earn a total of 936.00 from holding Cisco Systems or generate 19.01% 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. Enbridge
Performance |
| Timeline |
| Cisco Systems |
| Enbridge |
Cisco Systems and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Enbridge
The main advantage of trading using opposite Cisco Systems and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Enbridge vs. GasLog Partners LP | Enbridge vs. GasLog Partners LP | Enbridge vs. NGL Energy Partners | Enbridge vs. Seapeak LLC |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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