Correlation Between Cisco Systems and Madison Mid

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

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

Diversification Opportunities for Cisco Systems and Madison Mid

-0.71

Correlation Coefficient

Cisco Systems  Madison Mid

Pay attention - limited upside

The 3 months correlation between Cisco and Madison is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Madison Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madison Mid Cap 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 Madison Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madison Mid Cap has no effect on the direction of Cisco Systems i.e., Cisco Systems and Madison Mid go up and down completely randomly.

Pair Corralation between Cisco Systems and Madison Mid

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.25 times more return on investment than Madison Mid. However, Cisco Systems is 1.25 times more volatile than Madison Mid Cap. It trades about 0.08 of its potential returns per unit of risk. Madison Mid Cap is currently generating about 0.03 per unit of risk. If you would invest  4,743  in Cisco Systems on September 6, 2025 and sell it today you would earn a total of  3,054  from holding Cisco Systems or generate 64.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Cisco Systems  vs.  Madison Mid Cap

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Madison Mid Cap

Risk-Adjusted Performance

Weakest

Over the last 90 days Madison Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Madison Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and Madison Mid

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

The idea behind Cisco Systems and Madison Mid Cap 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..