Correlation Between Cisco Systems and Fortinet
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Fortinet 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 Fortinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Fortinet, you can compare the effects of market volatilities on Cisco Systems and Fortinet 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 Fortinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Fortinet.
Diversification Opportunities for Cisco Systems and Fortinet
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and Fortinet is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Fortinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortinet 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 Fortinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortinet has no effect on the direction of Cisco Systems i.e., Cisco Systems and Fortinet go up and down completely randomly.
Pair Corralation between Cisco Systems and Fortinet
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.24 times less return on investment than Fortinet. But when comparing it to its historical volatility, Cisco Systems is 2.02 times less risky than Fortinet. It trades about 0.27 of its potential returns per unit of risk. Fortinet is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,713 in Fortinet on September 3, 2024 and sell it today you would earn a total of 1,792 from holding Fortinet or generate 23.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Fortinet
Performance |
| Timeline |
| Cisco Systems |
| Fortinet |
Cisco Systems and Fortinet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Fortinet
The main advantage of trading using opposite Cisco Systems and Fortinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Fortinet 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 Fortinet will offset losses from the drop in Fortinet's long position.| Cisco Systems vs. Highway Holdings Limited | Cisco Systems vs. QCR Holdings | Cisco Systems vs. Partner Communications | Cisco Systems vs. Acumen Pharmaceuticals |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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