Correlation Between Cisco Systems and IShares China
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and IShares China 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 IShares China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and iShares China Large Cap, you can compare the effects of market volatilities on Cisco Systems and IShares China 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 IShares China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and IShares China.
Diversification Opportunities for Cisco Systems and IShares China
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and IShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and iShares China Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares China Large 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 IShares China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares China Large has no effect on the direction of Cisco Systems i.e., Cisco Systems and IShares China go up and down completely randomly.
Pair Corralation between Cisco Systems and IShares China
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.55 times more return on investment than IShares China. However, Cisco Systems is 1.83 times less risky than IShares China. It trades about 0.16 of its potential returns per unit of risk. iShares China Large Cap is currently generating about 0.05 per unit of risk. If you would invest 4,554 in Cisco Systems on August 24, 2024 and sell it today you would earn a total of 1,202 from holding Cisco Systems or generate 26.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. iShares China Large Cap
Performance |
| Timeline |
| Cisco Systems |
| iShares China Large |
Cisco Systems and IShares China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and IShares China
The main advantage of trading using opposite Cisco Systems and IShares China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, IShares China 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 IShares China will offset losses from the drop in IShares China's long position.| Cisco Systems vs. NETGEAR | Cisco Systems vs. Small Cap Core | Cisco Systems vs. Morningstar Unconstrained Allocation | Cisco Systems vs. Mutual Of America |
| IShares China vs. iShares MSCI Brazil | IShares China vs. iShares MSCI Emerging | IShares China vs. iShares MSCI Japan | IShares China vs. iShares MSCI Hong |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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