Correlation Between Cisco Systems and Western Asset
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Western Asset Global, you can compare the effects of market volatilities on Cisco Systems and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Western Asset.
Diversification Opportunities for Cisco Systems and Western Asset
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cisco and Western is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of Cisco Systems i.e., Cisco Systems and Western Asset go up and down completely randomly.
Pair Corralation between Cisco Systems and Western Asset
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.83 times more return on investment than Western Asset. However, Cisco Systems is 1.83 times more volatile than Western Asset Global. It trades about 0.05 of its potential returns per unit of risk. Western Asset Global is currently generating about 0.04 per unit of risk. If you would invest 4,466 in Cisco Systems on September 14, 2024 and sell it today you would earn a total of 1,419 from holding Cisco Systems or generate 31.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Western Asset Global
Performance |
| Timeline |
| Cisco Systems |
| Western Asset Global |
Cisco Systems and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Western Asset
The main advantage of trading using opposite Cisco Systems and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Cisco Systems vs. Passage Bio | Cisco Systems vs. Black Diamond Therapeutics | Cisco Systems vs. Alector | Cisco Systems vs. Century Therapeutics |
| Western Asset vs. Western Asset High | Western Asset vs. Western Asset Global | Western Asset vs. European Equity Closed | Western Asset vs. Doubleline Opportunistic Credit |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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