Correlation Between Cisco Systems and Merrill Lynch
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Merrill Lynch 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 Merrill Lynch into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Merrill Lynch, you can compare the effects of market volatilities on Cisco Systems and Merrill Lynch 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 Merrill Lynch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Merrill Lynch.
Diversification Opportunities for Cisco Systems and Merrill Lynch
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Merrill is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Merrill Lynch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch 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 Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch has no effect on the direction of Cisco Systems i.e., Cisco Systems and Merrill Lynch go up and down completely randomly.
Pair Corralation between Cisco Systems and Merrill Lynch
If you would invest 4,968 in Cisco Systems on September 2, 2024 and sell it today you would earn a total of 953.00 from holding Cisco Systems or generate 19.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Cisco Systems vs. Merrill Lynch
Performance |
| Timeline |
| Cisco Systems |
| Merrill Lynch |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cisco Systems and Merrill Lynch Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Merrill Lynch
The main advantage of trading using opposite Cisco Systems and Merrill Lynch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Merrill Lynch 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 Merrill Lynch will offset losses from the drop in Merrill Lynch's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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