Correlation Between Cisco Systems and Novonix
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Novonix 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 Novonix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Novonix Ltd ADR, you can compare the effects of market volatilities on Cisco Systems and Novonix 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 Novonix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Novonix.
Diversification Opportunities for Cisco Systems and Novonix
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and Novonix is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Novonix Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novonix Ltd ADR 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 Novonix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novonix Ltd ADR has no effect on the direction of Cisco Systems i.e., Cisco Systems and Novonix go up and down completely randomly.
Pair Corralation between Cisco Systems and Novonix
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.22 times more return on investment than Novonix. However, Cisco Systems is 4.63 times less risky than Novonix. It trades about 0.06 of its potential returns per unit of risk. Novonix Ltd ADR is currently generating about -0.02 per unit of risk. If you would invest 4,620 in Cisco Systems on November 27, 2024 and sell it today you would earn a total of 1,779 from holding Cisco Systems or generate 38.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Cisco Systems vs. Novonix Ltd ADR
Performance |
| Timeline |
| Cisco Systems |
| Novonix Ltd ADR |
Cisco Systems and Novonix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Novonix
The main advantage of trading using opposite Cisco Systems and Novonix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Novonix 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 Novonix will offset losses from the drop in Novonix's long position.| Cisco Systems vs. Mynaric AG ADR | Cisco Systems vs. KVH Industries | Cisco Systems vs. Telesat Corp | Cisco Systems vs. Digi International |
| Novonix vs. Magnis Energy Technologies | Novonix vs. Exro Technologies | Novonix vs. Ilika plc | Novonix vs. FuelPositive 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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