Correlation Between Cisco Systems and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and IShares Trust 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 Trust 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 Trust, you can compare the effects of market volatilities on Cisco Systems and IShares Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and IShares Trust.
Diversification Opportunities for Cisco Systems and IShares Trust
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and IShares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Cisco Systems i.e., Cisco Systems and IShares Trust go up and down completely randomly.
Pair Corralation between Cisco Systems and IShares Trust
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.56 times more return on investment than IShares Trust. However, Cisco Systems is 2.56 times more volatile than iShares Trust. It trades about 0.3 of its potential returns per unit of risk. iShares Trust is currently generating about 0.29 per unit of risk. If you would invest 5,583 in Cisco Systems on September 5, 2024 and sell it today you would earn a total of 379.00 from holding Cisco Systems or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 72.73% |
| Values | Daily Returns |
Cisco Systems vs. iShares Trust
Performance |
| Timeline |
| Cisco Systems |
| iShares Trust |
Cisco Systems and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and IShares Trust
The main advantage of trading using opposite Cisco Systems and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust's long position.| Cisco Systems vs. Cambium Networks Corp | Cisco Systems vs. Knowles Cor | Cisco Systems vs. Ituran Location and | Cisco Systems vs. ADTRAN Inc |
| IShares Trust vs. Vanguard Total Stock | IShares Trust vs. SPDR SP 500 | IShares Trust vs. Vanguard Total Bond | IShares Trust vs. Vanguard Value Index |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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