Correlation Between Cisco Systems and THC Therapeutics
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and THC Therapeutics 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 THC Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and THC Therapeutics, you can compare the effects of market volatilities on Cisco Systems and THC Therapeutics 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 THC Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and THC Therapeutics.
Diversification Opportunities for Cisco Systems and THC Therapeutics
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and THC is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and THC Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THC Therapeutics 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 THC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THC Therapeutics has no effect on the direction of Cisco Systems i.e., Cisco Systems and THC Therapeutics go up and down completely randomly.
Pair Corralation between Cisco Systems and THC Therapeutics
Given the investment horizon of 90 days Cisco Systems is expected to generate 96.55 times less return on investment than THC Therapeutics. But when comparing it to its historical volatility, Cisco Systems is 158.01 times less risky than THC Therapeutics. It trades about 0.32 of its potential returns per unit of risk. THC Therapeutics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 0.04 in THC Therapeutics on August 29, 2024 and sell it today you would earn a total of 0.01 from holding THC Therapeutics or generate 25.0% 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. THC Therapeutics
Performance |
| Timeline |
| Cisco Systems |
| THC Therapeutics |
Cisco Systems and THC Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and THC Therapeutics
The main advantage of trading using opposite Cisco Systems and THC Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, THC Therapeutics 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 THC Therapeutics will offset losses from the drop in THC Therapeutics' long position.| Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group | Cisco Systems vs. Ultra Clean Holdings |
| THC Therapeutics vs. Rezolute | THC Therapeutics vs. Tempest Therapeutics | THC Therapeutics vs. Forte Biosciences | THC Therapeutics vs. Dyadic International |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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