Correlation Between Cisco Systems and First Solar
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and First Solar 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 Solar 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 Solar, you can compare the effects of market volatilities on Cisco Systems and First Solar 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 Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and First Solar.
Diversification Opportunities for Cisco Systems and First Solar
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cisco and First is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar 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 Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Cisco Systems i.e., Cisco Systems and First Solar go up and down completely randomly.
Pair Corralation between Cisco Systems and First Solar
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.36 times more return on investment than First Solar. However, Cisco Systems is 2.78 times less risky than First Solar. It trades about 0.06 of its potential returns per unit of risk. First Solar is currently generating about 0.02 per unit of risk. If you would invest 4,575 in Cisco Systems on October 25, 2024 and sell it today you would earn a total of 1,648 from holding Cisco Systems or generate 36.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. First Solar
Performance |
| Timeline |
| Cisco Systems |
| First Solar |
Cisco Systems and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and First Solar
The main advantage of trading using opposite Cisco Systems and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, First Solar 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 Solar will offset losses from the drop in First Solar's long position.| Cisco Systems vs. Comtech Telecommunications Corp | Cisco Systems vs. NETGEAR | Cisco Systems vs. KVH Industries | Cisco Systems vs. Silicom |
| First Solar vs. Enphase Energy | First Solar vs. Sunrun Inc | First Solar vs. Canadian Solar | First Solar vs. SolarEdge Technologies |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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