Correlation Between Cisco Systems and Cemkx

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

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

Diversification Opportunities for Cisco Systems and Cemkx

0.46

Correlation Coefficient

Cisco Systems  Cemkx

Very weak diversification

The 3 months correlation between Cisco and Cemkx is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Cemkx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemkx 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 Cemkx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemkx has no effect on the direction of Cisco Systems i.e., Cisco Systems and Cemkx go up and down completely randomly.

Pair Corralation between Cisco Systems and Cemkx

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.54 times more return on investment than Cemkx. However, Cisco Systems is 1.54 times more volatile than Cemkx. It trades about 0.24 of its potential returns per unit of risk. Cemkx is currently generating about 0.31 per unit of risk. If you would invest  5,738  in Cisco Systems on April 30, 2025 and sell it today you would earn a total of  1,054  from holding Cisco Systems or generate 18.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Cisco Systems  vs.  Cemkx

Cisco Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 19 (%) 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.

Cemkx

Risk-Adjusted Performance

Solid

Over the last 90 days Cemkx has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward-looking signals, Cemkx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Cemkx

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

The idea behind Cisco Systems and Cemkx 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.