Correlation Between Cisco Systems and Sotera Health
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Sotera Health 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 Sotera Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Sotera Health Co, you can compare the effects of market volatilities on Cisco Systems and Sotera Health 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 Sotera Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Sotera Health.
Diversification Opportunities for Cisco Systems and Sotera Health
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and Sotera is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Sotera Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotera Health 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 Sotera Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotera Health has no effect on the direction of Cisco Systems i.e., Cisco Systems and Sotera Health go up and down completely randomly.
Pair Corralation between Cisco Systems and Sotera Health
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.86 times more return on investment than Sotera Health. However, Cisco Systems is 1.16 times less risky than Sotera Health. It trades about 0.12 of its potential returns per unit of risk. Sotera Health Co is currently generating about 0.03 per unit of risk. If you would invest 5,870 in Cisco Systems on November 3, 2024 and sell it today you would earn a total of 190.00 from holding Cisco Systems or generate 3.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Sotera Health Co
Performance |
| Timeline |
| Cisco Systems |
| Sotera Health |
Cisco Systems and Sotera Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Sotera Health
The main advantage of trading using opposite Cisco Systems and Sotera Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Sotera Health 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 Sotera Health will offset losses from the drop in Sotera Health's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Sotera Health vs. Qiagen NV | Sotera Health vs. Aclaris Therapeutics | Sotera Health vs. Neogen | Sotera Health vs. RadNet 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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