Correlation Between Cisco Systems and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Northern Lights 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 Northern Lights into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Northern Lights, you can compare the effects of market volatilities on Cisco Systems and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Northern Lights.
Diversification Opportunities for Cisco Systems and Northern Lights
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cisco and Northern is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Cisco Systems i.e., Cisco Systems and Northern Lights go up and down completely randomly.
Pair Corralation between Cisco Systems and Northern Lights
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.87 times more return on investment than Northern Lights. However, Cisco Systems is 1.15 times less risky than Northern Lights. It trades about 0.25 of its potential returns per unit of risk. Northern Lights is currently generating about 0.17 per unit of risk. If you would invest 5,858 in Cisco Systems on October 22, 2024 and sell it today you would earn a total of 165.00 from holding Cisco Systems or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Northern Lights
Performance |
| Timeline |
| Cisco Systems |
| Northern Lights |
Cisco Systems and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Northern Lights
The main advantage of trading using opposite Cisco Systems and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Northern Lights vs. SmartETFs Dividend Builder | Northern Lights vs. Grizzle Growth ETF | Northern Lights vs. FMQQ The Next |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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