Correlation Between Cisco Systems and NightFood Holdings
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and NightFood Holdings 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 NightFood Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and NightFood Holdings, you can compare the effects of market volatilities on Cisco Systems and NightFood Holdings 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 NightFood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and NightFood Holdings.
Diversification Opportunities for Cisco Systems and NightFood Holdings
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cisco and NightFood is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings 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 NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of Cisco Systems i.e., Cisco Systems and NightFood Holdings go up and down completely randomly.
Pair Corralation between Cisco Systems and NightFood Holdings
Given the investment horizon of 90 days Cisco Systems is expected to generate 7.44 times less return on investment than NightFood Holdings. But when comparing it to its historical volatility, Cisco Systems is 12.22 times less risky than NightFood Holdings. It trades about 0.09 of its potential returns per unit of risk. NightFood Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1.79 in NightFood Holdings on September 2, 2024 and sell it today you would lose (0.63) from holding NightFood Holdings or give up 35.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. NightFood Holdings
Performance |
| Timeline |
| Cisco Systems |
| NightFood Holdings |
Cisco Systems and NightFood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and NightFood Holdings
The main advantage of trading using opposite Cisco Systems and NightFood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, NightFood Holdings 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 NightFood Holdings will offset losses from the drop in NightFood Holdings' long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| NightFood Holdings vs. The A2 Milk | NightFood Holdings vs. Artisan Consumer Goods | NightFood Holdings vs. General Mills |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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