Correlation Between Cisco Systems and DigiMax Global

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

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

Diversification Opportunities for Cisco Systems and DigiMax Global

0.79

Correlation Coefficient

Cisco Systems  DigiMax Global

Poor diversification

The 3 months correlation between Cisco and DigiMax is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and DigiMax Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DigiMax Global 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 DigiMax Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DigiMax Global has no effect on the direction of Cisco Systems i.e., Cisco Systems and DigiMax Global go up and down completely randomly.

Pair Corralation between Cisco Systems and DigiMax Global

Given the investment horizon of 90 days Cisco Systems is expected to generate 82.55 times less return on investment than DigiMax Global. But when comparing it to its historical volatility, Cisco Systems is 111.47 times less risky than DigiMax Global. It trades about 0.19 of its potential returns per unit of risk. DigiMax Global is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2.10  in DigiMax Global on May 4, 2025 and sell it today you would earn a total of  97.90  from holding DigiMax Global or generate 4661.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Cisco Systems  vs.  DigiMax Global

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 14 (%) 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.

DigiMax Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DigiMax Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DigiMax Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and DigiMax Global

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

The idea behind Cisco Systems and DigiMax Global 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.