Correlation Between Cisco Systems and T REX
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and T REX 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 T REX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and T REX 2X Long, you can compare the effects of market volatilities on Cisco Systems and T REX 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 T REX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and T REX.
Diversification Opportunities for Cisco Systems and T REX
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and TSLT is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and T REX 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T REX 2X 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 T REX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T REX 2X has no effect on the direction of Cisco Systems i.e., Cisco Systems and T REX go up and down completely randomly.
Pair Corralation between Cisco Systems and T REX
Given the investment horizon of 90 days Cisco Systems is expected to generate 8.72 times less return on investment than T REX. But when comparing it to its historical volatility, Cisco Systems is 9.49 times less risky than T REX. It trades about 0.36 of its potential returns per unit of risk. T REX 2X Long is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,614 in T REX 2X Long on September 1, 2024 and sell it today you would earn a total of 1,294 from holding T REX 2X Long or generate 80.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. T REX 2X Long
Performance |
| Timeline |
| Cisco Systems |
| T REX 2X |
Cisco Systems and T REX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and T REX
The main advantage of trading using opposite Cisco Systems and T REX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, T REX 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 T REX will offset losses from the drop in T REX's long position.| Cisco Systems vs. Comtech Telecommunications Corp | Cisco Systems vs. KVH Industries | Cisco Systems vs. Silicom | Cisco Systems vs. Knowles Cor |
| T REX vs. Tidal Trust II | T REX vs. Tidal Trust II | T REX vs. Direxion Daily META | T REX vs. Direxion Daily META |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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