Correlation Between Cisco Systems and Bion Environmental

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

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

Diversification Opportunities for Cisco Systems and Bion Environmental

0.81

Correlation Coefficient

Cisco Systems  Bion Environmental

Very poor diversification

The 3 months correlation between Cisco and Bion is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Bion Environmental Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bion Environmental 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 Bion Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bion Environmental has no effect on the direction of Cisco Systems i.e., Cisco Systems and Bion Environmental go up and down completely randomly.

Pair Corralation between Cisco Systems and Bion Environmental

Given the investment horizon of 90 days Cisco Systems is expected to generate 10.09 times less return on investment than Bion Environmental. But when comparing it to its historical volatility, Cisco Systems is 18.49 times less risky than Bion Environmental. It trades about 0.34 of its potential returns per unit of risk. Bion Environmental Technologies is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Bion Environmental Technologies on April 20, 2025 and sell it today you would earn a total of  15.00  from holding Bion Environmental Technologies or generate 300.0% return on investment over 90 days.

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

Cisco Systems  vs.  Bion Environmental Technologie

Cisco Systems

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Bion Environmental

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bion Environmental Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Bion Environmental unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Bion Environmental

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

The idea behind Cisco Systems and Bion Environmental Technologies 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.

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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.