Correlation Between Cisco Systems and First Pacific

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

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

Diversification Opportunities for Cisco Systems and First Pacific

0.77

Correlation Coefficient

Cisco Systems  First Pacific

Poor diversification

The 3 months correlation between Cisco and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and First Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Pacific 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 First Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Pacific has no effect on the direction of Cisco Systems i.e., Cisco Systems and First Pacific go up and down completely randomly.

Pair Corralation between Cisco Systems and First Pacific

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.22 times less return on investment than First Pacific. But when comparing it to its historical volatility, Cisco Systems is 3.35 times less risky than First Pacific. It trades about 0.29 of its potential returns per unit of risk. First Pacific is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  63.00  in First Pacific on April 26, 2025 and sell it today you would earn a total of  14.00  from holding First Pacific or generate 22.22% 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.  First Pacific

Cisco Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 22 (%) 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.

First Pacific

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Pacific are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, First Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and First Pacific

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

The idea behind Cisco Systems and First Pacific 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.