Correlation Between Cisco Systems and SPDR SSGA
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and SPDR SSGA 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 SPDR SSGA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and SPDR SSGA Small, you can compare the effects of market volatilities on Cisco Systems and SPDR SSGA 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 SPDR SSGA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and SPDR SSGA.
Diversification Opportunities for Cisco Systems and SPDR SSGA
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cisco and SPDR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and SPDR SSGA Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSGA Small 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 SPDR SSGA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSGA Small has no effect on the direction of Cisco Systems i.e., Cisco Systems and SPDR SSGA go up and down completely randomly.
Pair Corralation between Cisco Systems and SPDR SSGA
Given the investment horizon of 90 days Cisco Systems is expected to generate 1.34 times less return on investment than SPDR SSGA. But when comparing it to its historical volatility, Cisco Systems is 2.1 times less risky than SPDR SSGA. It trades about 0.32 of its potential returns per unit of risk. SPDR SSGA Small is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 12,676 in SPDR SSGA Small on August 28, 2024 and sell it today you would earn a total of 1,288 from holding SPDR SSGA Small or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. SPDR SSGA Small
Performance |
| Timeline |
| Cisco Systems |
| SPDR SSGA Small |
Cisco Systems and SPDR SSGA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and SPDR SSGA
The main advantage of trading using opposite Cisco Systems and SPDR SSGA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, SPDR SSGA 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 SPDR SSGA will offset losses from the drop in SPDR SSGA's long position.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
| SPDR SSGA vs. SPDR SSGA Large | SPDR SSGA vs. Invesco SP SmallCap | SPDR SSGA vs. Invesco SP MidCap | SPDR SSGA vs. SPDR MSCI EAFE |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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