Correlation Between Cisco Systems and Oklahoma Municipal

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Oklahoma Municipal 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 Oklahoma Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Oklahoma Municipal Fund, you can compare the effects of market volatilities on Cisco Systems and Oklahoma Municipal 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 Oklahoma Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Oklahoma Municipal.

Diversification Opportunities for Cisco Systems and Oklahoma Municipal

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Cisco and Oklahoma is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Oklahoma Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oklahoma Municipal 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 Oklahoma Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oklahoma Municipal has no effect on the direction of Cisco Systems i.e., Cisco Systems and Oklahoma Municipal go up and down completely randomly.

Pair Corralation between Cisco Systems and Oklahoma Municipal

Given the investment horizon of 90 days Cisco Systems is expected to generate 3.21 times more return on investment than Oklahoma Municipal. However, Cisco Systems is 3.21 times more volatile than Oklahoma Municipal Fund. It trades about 0.21 of its potential returns per unit of risk. Oklahoma Municipal Fund is currently generating about 0.1 per unit of risk. If you would invest  5,574  in Cisco Systems on August 26, 2024 and sell it today you would earn a total of  281.00  from holding Cisco Systems or generate 5.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Oklahoma Municipal Fund

 Performance 
       Timeline  
Cisco Systems 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.
Oklahoma Municipal 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Oklahoma Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Oklahoma Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cisco Systems and Oklahoma Municipal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Oklahoma Municipal

The main advantage of trading using opposite Cisco Systems and Oklahoma Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Oklahoma Municipal 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 Oklahoma Municipal will offset losses from the drop in Oklahoma Municipal's long position.
The idea behind Cisco Systems and Oklahoma Municipal Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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