Correlation Between Cisco Systems and NICE
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and NICE 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 NICE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and NICE, you can compare the effects of market volatilities on Cisco Systems and NICE 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 NICE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and NICE.
Diversification Opportunities for Cisco Systems and NICE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and NICE is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and NICE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICE 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 NICE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICE has no effect on the direction of Cisco Systems i.e., Cisco Systems and NICE go up and down completely randomly.
Pair Corralation between Cisco Systems and NICE
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.61 times more return on investment than NICE. However, Cisco Systems is 1.64 times less risky than NICE. It trades about 0.25 of its potential returns per unit of risk. NICE is currently generating about -0.07 per unit of risk. If you would invest 5,282 in Cisco Systems on August 30, 2024 and sell it today you would earn a total of 647.00 from holding Cisco Systems or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.73% |
| Values | Daily Returns |
Cisco Systems vs. NICE
Performance |
| Timeline |
| Cisco Systems |
| NICE |
Cisco Systems and NICE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and NICE
The main advantage of trading using opposite Cisco Systems and NICE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, NICE 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 NICE will offset losses from the drop in NICE'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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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