Correlation Between Cisco Systems and Vodafone Group
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Vodafone Group 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 Vodafone Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Vodafone Group PLC, you can compare the effects of market volatilities on Cisco Systems and Vodafone Group 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 Vodafone Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Vodafone Group.
Diversification Opportunities for Cisco Systems and Vodafone Group
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cisco and Vodafone is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Vodafone Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Group PLC 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 Vodafone Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Group PLC has no effect on the direction of Cisco Systems i.e., Cisco Systems and Vodafone Group go up and down completely randomly.
Pair Corralation between Cisco Systems and Vodafone Group
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.47 times more return on investment than Vodafone Group. However, Cisco Systems is 2.12 times less risky than Vodafone Group. It trades about 0.19 of its potential returns per unit of risk. Vodafone Group PLC is currently generating about -0.23 per unit of risk. If you would invest 5,596 in Cisco Systems on August 25, 2024 and sell it today you would earn a total of 259.00 from holding Cisco Systems or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cisco Systems vs. Vodafone Group PLC
Performance |
| Timeline |
| Cisco Systems |
| Vodafone Group PLC |
Cisco Systems and Vodafone Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Vodafone Group
The main advantage of trading using opposite Cisco Systems and Vodafone Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Vodafone Group 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 Vodafone Group will offset losses from the drop in Vodafone Group's long position.| Cisco Systems vs. Lumentum Holdings | Cisco Systems vs. Ichor Holdings | Cisco Systems vs. Fabrinet | Cisco Systems vs. Hello Group |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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