Correlation Between Cisco Systems and First Trust
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and First Trust Alternative, you can compare the effects of market volatilities on Cisco Systems and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and First Trust.
Diversification Opportunities for Cisco Systems and First Trust
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and First is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and First Trust Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Alternative 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Alternative has no effect on the direction of Cisco Systems i.e., Cisco Systems and First Trust go up and down completely randomly.
Pair Corralation between Cisco Systems and First Trust
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.24 times more return on investment than First Trust. However, Cisco Systems is 2.24 times more volatile than First Trust Alternative. It trades about 0.1 of its potential returns per unit of risk. First Trust Alternative is currently generating about 0.02 per unit of risk. If you would invest 4,795 in Cisco Systems on August 29, 2024 and sell it today you would earn a total of 1,134 from holding Cisco Systems or generate 23.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. First Trust Alternative
Performance |
| Timeline |
| Cisco Systems |
| First Trust Alternative |
Cisco Systems and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and First Trust
The main advantage of trading using opposite Cisco Systems and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Cisco Systems vs. NETGEAR | Cisco Systems vs. Clearfield | Cisco Systems vs. ABIVAX Socit Anonyme | Cisco Systems vs. Morningstar Unconstrained Allocation |
| First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust SSI | First Trust vs. First Trust Indxx |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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