Correlation Between IShares Trust and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Cisco Systems 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 IShares Trust and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Cisco Systems, you can compare the effects of market volatilities on IShares Trust and Cisco Systems 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 IShares Trust with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Cisco Systems.
Diversification Opportunities for IShares Trust and Cisco Systems
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and Cisco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and IShares Trust 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 iShares Trust are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of IShares Trust i.e., IShares Trust and Cisco Systems go up and down completely randomly.
Pair Corralation between IShares Trust and Cisco Systems
Assuming the 90 days trading horizon IShares Trust is expected to generate 1.64 times less return on investment than Cisco Systems. But when comparing it to its historical volatility, iShares Trust is 1.68 times less risky than Cisco Systems. It trades about 0.27 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 112,664 in Cisco Systems on August 30, 2024 and sell it today you would earn a total of 10,179 from holding Cisco Systems or generate 9.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
iShares Trust vs. Cisco Systems
Performance |
| Timeline |
| iShares Trust |
| Cisco Systems |
IShares Trust and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Cisco Systems
The main advantage of trading using opposite IShares Trust and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.| IShares Trust vs. SPDR SP 500 | IShares Trust vs. Vanguard Bond Index | IShares Trust vs. Invesco QQQ Trust | IShares Trust vs. Vanguard Tax Managed Funds |
| Cisco Systems vs. McEwen Mining | Cisco Systems vs. Cognizant Technology Solutions | Cisco Systems vs. Costco Wholesale | Cisco Systems vs. Grupo Carso SAB |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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