Correlation Between Cisco Systems and First Trust
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and First 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 First 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 First Trust Exchange Traded, you can compare the effects of market volatilities on Cisco Systems and First 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and First Trust.
Diversification Opportunities for Cisco Systems and First Trust
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and First is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Cisco Systems i.e., Cisco Systems and First Trust go up and down completely randomly.
Pair Corralation between Cisco Systems and First Trust
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.33 times more return on investment than First Trust. However, Cisco Systems is 1.33 times more volatile than First Trust Exchange Traded. It trades about 0.28 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.27 per unit of risk. If you would invest 5,583 in Cisco Systems on September 3, 2024 and sell it today you would earn a total of 338.00 from holding Cisco Systems or generate 6.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. First Trust Exchange Traded
Performance |
| Timeline |
| Cisco Systems |
| First Trust Exchange |
Cisco Systems and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and First Trust
The main advantage of trading using opposite Cisco Systems and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.| Cisco Systems vs. Highway Holdings Limited | Cisco Systems vs. QCR Holdings | Cisco Systems vs. Partner Communications | Cisco Systems vs. Acumen Pharmaceuticals |
| First Trust vs. FT Vest Equity | First Trust vs. Northern Lights | First Trust vs. Dimensional International High | First Trust vs. JPMorgan Fundamental Data |
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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