Correlation Between Cisco Systems and Pure Energy

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

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

Diversification Opportunities for Cisco Systems and Pure Energy

-0.38

Correlation Coefficient

Cisco Systems  Pure Energy

Very good diversification

The 3 months correlation between Cisco and Pure is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Pure Energy Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Energy Minerals 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 Pure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Energy Minerals has no effect on the direction of Cisco Systems i.e., Cisco Systems and Pure Energy go up and down completely randomly.

Pair Corralation between Cisco Systems and Pure Energy

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.2 times more return on investment than Pure Energy. However, Cisco Systems is 4.93 times less risky than Pure Energy. It trades about 0.24 of its potential returns per unit of risk. Pure Energy Minerals is currently generating about -0.03 per unit of risk. If you would invest  5,738  in Cisco Systems on April 30, 2025 and sell it today you would earn a total of  1,054  from holding Cisco Systems or generate 18.37% return on investment over 90 days.

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

Cisco Systems  vs.  Pure Energy Minerals

Cisco Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 19 (%) 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.

Pure Energy Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pure Energy Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Cisco Systems and Pure Energy

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

The idea behind Cisco Systems and Pure Energy Minerals 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.