Correlation Between Cisco Systems and ABBVIE

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and ABBVIE 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 ABBVIE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and ABBVIE INC, you can compare the effects of market volatilities on Cisco Systems and ABBVIE 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 ABBVIE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and ABBVIE.

Diversification Opportunities for Cisco Systems and ABBVIE

CiscoABBVIEDiversified AwayCiscoABBVIEDiversified Away100%
0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cisco and ABBVIE is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ABBVIE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABBVIE INC 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 ABBVIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABBVIE INC has no effect on the direction of Cisco Systems i.e., Cisco Systems and ABBVIE go up and down completely randomly.

Pair Corralation between Cisco Systems and ABBVIE

Given the investment horizon of 90 days Cisco Systems is expected to generate 4.93 times more return on investment than ABBVIE. However, Cisco Systems is 4.93 times more volatile than ABBVIE INC. It trades about 0.48 of its potential returns per unit of risk. ABBVIE INC is currently generating about 0.21 per unit of risk. If you would invest  5,908  in Cisco Systems on November 27, 2024 and sell it today you would earn a total of  519.00  from holding Cisco Systems or generate 8.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  ABBVIE INC

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20246810
JavaScript chart by amCharts 3.21.15CSCO 00287YBV0
       Timeline  
Cisco Systems 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb5860626466
ABBVIE INC 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in ABBVIE INC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ABBVIE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15JanMar9797.297.497.697.89898.2

Cisco Systems and ABBVIE Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.14-2.35-1.56-0.780.00.831.692.543.44.26 510152025
JavaScript chart by amCharts 3.21.15CSCO 00287YBV0
       Returns  

Pair Trading with Cisco Systems and ABBVIE

The main advantage of trading using opposite Cisco Systems and ABBVIE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, ABBVIE 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 ABBVIE will offset losses from the drop in ABBVIE's long position.
The idea behind Cisco Systems and ABBVIE INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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