Correlation Between Silicom and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both Silicom 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 Silicom and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Silicom and Cisco Systems, you can compare the effects of market volatilities on Silicom 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 Silicom with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicom and Cisco Systems.
Diversification Opportunities for Silicom and Cisco Systems
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Silicom and Cisco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Silicom and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Silicom 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 Silicom 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 Silicom i.e., Silicom and Cisco Systems go up and down completely randomly.
Pair Corralation between Silicom and Cisco Systems
Given the investment horizon of 90 days Silicom is expected to generate 4.24 times more return on investment than Cisco Systems. However, Silicom is 4.24 times more volatile than Cisco Systems. It trades about 0.14 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.23 per unit of risk. If you would invest 1,315 in Silicom on October 26, 2024 and sell it today you would earn a total of 420.00 from holding Silicom or generate 31.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Silicom vs. Cisco Systems
Performance |
| Timeline |
| Silicom |
| Cisco Systems |
Silicom and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Silicom and Cisco Systems
The main advantage of trading using opposite Silicom and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicom 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.| Silicom vs. Ituran Location and | Silicom vs. Sapiens International | Silicom vs. Allot Communications | Silicom vs. Radcom |
| Cisco Systems vs. Comtech Telecommunications Corp | Cisco Systems vs. NETGEAR | Cisco Systems vs. KVH Industries | Cisco Systems vs. Silicom |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |