Correlation Between Cisco Systems and Prospector Capital
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Prospector Capital 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 Prospector Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Prospector Capital Corp, you can compare the effects of market volatilities on Cisco Systems and Prospector Capital 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 Prospector Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Prospector Capital.
Diversification Opportunities for Cisco Systems and Prospector Capital
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and Prospector is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Prospector Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospector Capital Corp 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 Prospector Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospector Capital Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Prospector Capital go up and down completely randomly.
Pair Corralation between Cisco Systems and Prospector Capital
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.43 times more return on investment than Prospector Capital. However, Cisco Systems is 2.43 times more volatile than Prospector Capital Corp. It trades about 0.06 of its potential returns per unit of risk. Prospector Capital Corp is currently generating about 0.09 per unit of risk. If you would invest 4,426 in Cisco Systems on September 1, 2024 and sell it today you would earn a total of 1,495 from holding Cisco Systems or generate 33.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 24.84% |
| Values | Daily Returns |
Cisco Systems vs. Prospector Capital Corp
Performance |
| Timeline |
| Cisco Systems |
| Prospector Capital Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cisco Systems and Prospector Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Prospector Capital
The main advantage of trading using opposite Cisco Systems and Prospector Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Prospector Capital 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 Prospector Capital will offset losses from the drop in Prospector Capital's long position.| Cisco Systems vs. Comtech Telecommunications Corp | Cisco Systems vs. KVH Industries | Cisco Systems vs. Silicom | Cisco Systems vs. Knowles Cor |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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