Correlation Between Cisco Systems and EMCORE
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and EMCORE 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 EMCORE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and EMCORE, you can compare the effects of market volatilities on Cisco Systems and EMCORE 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 EMCORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and EMCORE.
Diversification Opportunities for Cisco Systems and EMCORE
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cisco and EMCORE is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of Cisco Systems i.e., Cisco Systems and EMCORE go up and down completely randomly.
Pair Corralation between Cisco Systems and EMCORE
Given the investment horizon of 90 days Cisco Systems is expected to generate 6.55 times less return on investment than EMCORE. But when comparing it to its historical volatility, Cisco Systems is 6.18 times less risky than EMCORE. It trades about 0.26 of its potential returns per unit of risk. EMCORE is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 213.00 in EMCORE on August 27, 2024 and sell it today you would earn a total of 87.00 from holding EMCORE or generate 40.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. EMCORE
Performance |
| Timeline |
| Cisco Systems |
| EMCORE |
Cisco Systems and EMCORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and EMCORE
The main advantage of trading using opposite Cisco Systems and EMCORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, EMCORE 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 EMCORE will offset losses from the drop in EMCORE's long position.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
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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