Correlation Between Cisco Systems and Inari Medical
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Inari Medical 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 Inari Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Inari Medical, you can compare the effects of market volatilities on Cisco Systems and Inari Medical 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 Inari Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Inari Medical.
Diversification Opportunities for Cisco Systems and Inari Medical
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Inari is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Inari Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inari Medical 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 Inari Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inari Medical has no effect on the direction of Cisco Systems i.e., Cisco Systems and Inari Medical go up and down completely randomly.
Pair Corralation between Cisco Systems and Inari Medical
Given the investment horizon of 90 days Cisco Systems is expected to generate 11.82 times less return on investment than Inari Medical. But when comparing it to its historical volatility, Cisco Systems is 13.64 times less risky than Inari Medical. It trades about 0.33 of its potential returns per unit of risk. Inari Medical is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5,324 in Inari Medical on October 23, 2024 and sell it today you would earn a total of 2,631 from holding Inari Medical or generate 49.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Cisco Systems vs. Inari Medical
Performance |
| Timeline |
| Cisco Systems |
| Inari Medical |
Cisco Systems and Inari Medical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Inari Medical
The main advantage of trading using opposite Cisco Systems and Inari Medical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Inari Medical 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 Inari Medical will offset losses from the drop in Inari Medical'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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