Correlation Between Cisco Systems and Linamar

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

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

Diversification Opportunities for Cisco Systems and Linamar

0.91

Correlation Coefficient

Cisco Systems  Linamar

Almost no diversification

The 3 months correlation between Cisco and Linamar is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Linamar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linamar 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 Linamar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linamar has no effect on the direction of Cisco Systems i.e., Cisco Systems and Linamar go up and down completely randomly.

Pair Corralation between Cisco Systems and Linamar

Given the investment horizon of 90 days Cisco Systems is expected to under-perform the Linamar. But the stock apears to be less risky and, when comparing its historical volatility, Cisco Systems is 1.65 times less risky than Linamar. The stock trades about -0.21 of its potential returns per unit of risk. The Linamar is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,930  in Linamar on May 4, 2025 and sell it today you would lose (28.00) from holding Linamar or give up 0.57% of portfolio value over 90 days.

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

Cisco Systems  vs.  Linamar

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.

Linamar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Linamar are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Linamar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Linamar

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

The idea behind Cisco Systems and Linamar 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.