Correlation Between Cisco Systems and IShares Technology
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and IShares Technology 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 Technology 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 Technology ETF, you can compare the effects of market volatilities on Cisco Systems and IShares Technology 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 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and IShares Technology.
Diversification Opportunities for Cisco Systems and IShares Technology
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cisco and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF 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 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of Cisco Systems i.e., Cisco Systems and IShares Technology go up and down completely randomly.
Pair Corralation between Cisco Systems and IShares Technology
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.95 times less return on investment than IShares Technology. But when comparing it to its historical volatility, Cisco Systems is 1.1 times less risky than IShares Technology. It trades about 0.04 of its potential returns per unit of risk. iShares Technology ETF is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 8,047 in iShares Technology ETF on August 23, 2024 and sell it today you would earn a total of 7,850 from holding iShares Technology ETF or generate 97.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. iShares Technology ETF
Performance |
| Timeline |
| Cisco Systems |
| iShares Technology ETF |
Cisco Systems and IShares Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and IShares Technology
The main advantage of trading using opposite Cisco Systems and IShares Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, IShares Technology 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 Technology will offset losses from the drop in IShares Technology'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 Technology vs. iShares Healthcare ETF | IShares Technology vs. iShares Financials ETF | IShares Technology vs. iShares Telecommunications ETF | IShares Technology vs. iShares Industrials ETF |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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