Correlation Between Cisco Systems and ON Semiconductor
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and ON Semiconductor 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 ON Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and ON Semiconductor, you can compare the effects of market volatilities on Cisco Systems and ON Semiconductor 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 ON Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and ON Semiconductor.
Diversification Opportunities for Cisco Systems and ON Semiconductor
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cisco and ON Semiconductor is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ON Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON Semiconductor 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 ON Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON Semiconductor has no effect on the direction of Cisco Systems i.e., Cisco Systems and ON Semiconductor go up and down completely randomly.
Pair Corralation between Cisco Systems and ON Semiconductor
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.54 times more return on investment than ON Semiconductor. However, Cisco Systems is 1.84 times less risky than ON Semiconductor. It trades about 0.25 of its potential returns per unit of risk. ON Semiconductor is currently generating about -0.08 per unit of risk. If you would invest 6,023 in Cisco Systems on November 18, 2024 and sell it today you would earn a total of 464.00 from holding Cisco Systems or generate 7.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. ON Semiconductor
Performance |
| Timeline |
| Cisco Systems |
| ON Semiconductor |
Cisco Systems and ON Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and ON Semiconductor
The main advantage of trading using opposite Cisco Systems and ON Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, ON Semiconductor 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 ON Semiconductor will offset losses from the drop in ON Semiconductor's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| ON Semiconductor vs. Texas Instruments Incorporated | ON Semiconductor vs. Microchip Technology | ON Semiconductor vs. Analog Devices | ON Semiconductor vs. Qorvo Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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