Correlation Between Cisco Systems and Newport Exploration
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Newport Exploration 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 Newport Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Newport Exploration, you can compare the effects of market volatilities on Cisco Systems and Newport Exploration 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 Newport Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Newport Exploration.
Diversification Opportunities for Cisco Systems and Newport Exploration
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and Newport is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Newport Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newport Exploration 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 Newport Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newport Exploration has no effect on the direction of Cisco Systems i.e., Cisco Systems and Newport Exploration go up and down completely randomly.
Pair Corralation between Cisco Systems and Newport Exploration
Given the investment horizon of 90 days Cisco Systems is expected to generate 34.06 times less return on investment than Newport Exploration. But when comparing it to its historical volatility, Cisco Systems is 20.22 times less risky than Newport Exploration. It trades about 0.05 of its potential returns per unit of risk. Newport Exploration is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Newport Exploration on September 12, 2024 and sell it today you would lose (11.00) from holding Newport Exploration or give up 64.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 73.73% |
| Values | Daily Returns |
Cisco Systems vs. Newport Exploration
Performance |
| Timeline |
| Cisco Systems |
| Newport Exploration |
Cisco Systems and Newport Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Newport Exploration
The main advantage of trading using opposite Cisco Systems and Newport Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Newport Exploration 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 Newport Exploration will offset losses from the drop in Newport Exploration's long position.| Cisco Systems vs. Victory Integrity Smallmid Cap | Cisco Systems vs. Hilton Worldwide Holdings | Cisco Systems vs. NVIDIA | Cisco Systems vs. JPMorgan Chase Co |
| Newport Exploration vs. Traction Uranium Corp | Newport Exploration vs. New Age Metals | Newport Exploration vs. York Harbour Metals | Newport Exploration vs. Silver Elephant Mining |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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