Correlation Between Cisco Systems and ScanSource

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and ScanSource 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 ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and ScanSource, you can compare the effects of market volatilities on Cisco Systems and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and ScanSource.

Diversification Opportunities for Cisco Systems and ScanSource

-0.11

Correlation Coefficient

Cisco Systems  ScanSource

Good diversification

The 3 months correlation between Cisco and ScanSource is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Cisco Systems i.e., Cisco Systems and ScanSource go up and down completely randomly.

Pair Corralation between Cisco Systems and ScanSource

Assuming the 90 days trading horizon Cisco Systems is expected to generate 0.6 times more return on investment than ScanSource. However, Cisco Systems is 1.65 times less risky than ScanSource. It trades about 0.06 of its potential returns per unit of risk. ScanSource is currently generating about 0.0 per unit of risk. If you would invest  5,540  in Cisco Systems on May 26, 2025 and sell it today you would earn a total of  221.00  from holding Cisco Systems or generate 3.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cisco Systems  vs.  ScanSource

Cisco Systems

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Cisco Systems is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ScanSource

Risk-Adjusted Performance

Weakest

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ScanSource is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cisco Systems and ScanSource

The main advantage of trading using opposite Cisco Systems and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.

The idea behind Cisco Systems and ScanSource 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.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.