Correlation Between Cisco Systems and Universal Music
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Universal Music 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 Universal Music into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Universal Music Group, you can compare the effects of market volatilities on Cisco Systems and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Universal Music.
Diversification Opportunities for Cisco Systems and Universal Music
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cisco and Universal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Cisco Systems i.e., Cisco Systems and Universal Music go up and down completely randomly.
Pair Corralation between Cisco Systems and Universal Music
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.61 times more return on investment than Universal Music. However, Cisco Systems is 1.64 times less risky than Universal Music. It trades about 0.26 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.04 per unit of risk. If you would invest 5,858 in Cisco Systems on October 24, 2024 and sell it today you would earn a total of 165.00 from holding Cisco Systems or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Universal Music Group
Performance |
| Timeline |
| Cisco Systems |
| Universal Music Group |
Cisco Systems and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Universal Music
The main advantage of trading using opposite Cisco Systems and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
| Universal Music vs. Universal Media Group | Universal Music vs. Bollor SE | Universal Music vs. Reading International | Universal Music vs. Warner Music Group |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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