Correlation Between Cisco Systems and Roundhill Magnificent

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

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

Diversification Opportunities for Cisco Systems and Roundhill Magnificent

0.48

Correlation Coefficient

Cisco Systems  Roundhill Magnificent

Very weak diversification

The 3 months correlation between Cisco and Roundhill is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Roundhill Magnificent Seven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roundhill Magnificent 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 Roundhill Magnificent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roundhill Magnificent has no effect on the direction of Cisco Systems i.e., Cisco Systems and Roundhill Magnificent go up and down completely randomly.

Pair Corralation between Cisco Systems and Roundhill Magnificent

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.21 times less return on investment than Roundhill Magnificent. But when comparing it to its historical volatility, Cisco Systems is 1.14 times less risky than Roundhill Magnificent. It trades about 0.24 of its potential returns per unit of risk. Roundhill Magnificent Seven is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,745  in Roundhill Magnificent Seven on May 1, 2025 and sell it today you would earn a total of  1,032  from holding Roundhill Magnificent Seven or generate 21.75% return on investment over 90 days.

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

Cisco Systems  vs.  Roundhill Magnificent Seven

Cisco Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 18 (%) 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.

Roundhill Magnificent

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Roundhill Magnificent Seven are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Roundhill Magnificent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Roundhill Magnificent

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

The idea behind Cisco Systems and Roundhill Magnificent Seven 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.