Correlation Between Snowflake and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both Snowflake 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 Snowflake and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snowflake and Cisco Systems, you can compare the effects of market volatilities on Snowflake 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 Snowflake with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snowflake and Cisco Systems.
Diversification Opportunities for Snowflake and Cisco Systems
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snowflake and Cisco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Snowflake and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Snowflake 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 Snowflake 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 Snowflake i.e., Snowflake and Cisco Systems go up and down completely randomly.
Pair Corralation between Snowflake and Cisco Systems
Given the investment horizon of 90 days Snowflake is expected to generate 6.54 times more return on investment than Cisco Systems. However, Snowflake is 6.54 times more volatile than Cisco Systems. It trades about 0.27 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.27 per unit of risk. If you would invest 11,899 in Snowflake on August 31, 2024 and sell it today you would earn a total of 5,471 from holding Snowflake or generate 45.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snowflake vs. Cisco Systems
Performance |
| Timeline |
| Snowflake |
| Cisco Systems |
Snowflake and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snowflake and Cisco Systems
The main advantage of trading using opposite Snowflake and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snowflake 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.The idea behind Snowflake and Cisco Systems 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.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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