Correlation Between ATT and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Cisco Systems, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Cisco Systems.
Diversification Opportunities for ATT and Cisco Systems
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATT and Cisco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and ATT 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 ATT Inc 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 ATT i.e., ATT and Cisco Systems go up and down completely randomly.
Pair Corralation between ATT and Cisco Systems
Taking into account the 90-day investment horizon ATT Inc is expected to generate 1.11 times more return on investment than Cisco Systems. However, ATT is 1.11 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 0.09 per unit of risk. If you would invest 1,524 in ATT Inc on August 24, 2024 and sell it today you would earn a total of 795.50 from holding ATT Inc or generate 52.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ATT Inc vs. Cisco Systems
Performance |
| Timeline |
| ATT Inc |
| Cisco Systems |
ATT and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Cisco Systems
The main advantage of trading using opposite ATT and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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. Eshallgo Class A | Cisco Systems vs. Amtech Systems | Cisco Systems vs. Gold Fields Ltd | Cisco Systems vs. Aegean Airlines SA |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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