Correlation Between Cisco Systems and F M
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and F M 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 F M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and F M Bank, you can compare the effects of market volatilities on Cisco Systems and F M 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 F M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and F M.
Diversification Opportunities for Cisco Systems and F M
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and FMBM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and F M Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on F M Bank 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 F M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of F M Bank has no effect on the direction of Cisco Systems i.e., Cisco Systems and F M go up and down completely randomly.
Pair Corralation between Cisco Systems and F M
Given the investment horizon of 90 days Cisco Systems is expected to generate 0.98 times more return on investment than F M. However, Cisco Systems is 1.02 times less risky than F M. It trades about 0.19 of its potential returns per unit of risk. F M Bank is currently generating about 0.17 per unit of risk. If you would invest 6,130 in Cisco Systems on May 10, 2025 and sell it today you would earn a total of 860.00 from holding Cisco Systems or generate 14.03% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Cisco Systems vs. F M Bank
Performance |
Timeline |
Cisco Systems |
F M Bank |
Cisco Systems and F M Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cisco Systems and F M
The main advantage of trading using opposite Cisco Systems and F M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, F M 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 F M will offset losses from the drop in F M's long position.Cisco Systems vs. Ciena Corp | Cisco Systems vs. Hewlett Packard Enterprise | Cisco Systems vs. International Business Machines | Cisco Systems vs. Intel |
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 Stocks Directory module to find actively traded stocks across global markets.
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