Correlation Between Cisco Systems and Plastic2Oil

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Plastic2Oil 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 Plastic2Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and Plastic2Oil, you can compare the effects of market volatilities on Cisco Systems and Plastic2Oil 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 Plastic2Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Plastic2Oil.

Diversification Opportunities for Cisco Systems and Plastic2Oil

-0.83

Correlation Coefficient

Cisco Systems  Plastic2Oil

Pay attention - limited upside

The 3 months correlation between Cisco and Plastic2Oil is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Plastic2Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plastic2Oil 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 Plastic2Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plastic2Oil has no effect on the direction of Cisco Systems i.e., Cisco Systems and Plastic2Oil go up and down completely randomly.

Pair Corralation between Cisco Systems and Plastic2Oil

Given the investment horizon of 90 days Cisco Systems is expected to generate 43.4 times less return on investment than Plastic2Oil. But when comparing it to its historical volatility, Cisco Systems is 82.23 times less risky than Plastic2Oil. It trades about 0.24 of its potential returns per unit of risk. Plastic2Oil is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.45  in Plastic2Oil on May 1, 2025 and sell it today you would lose (0.44) from holding Plastic2Oil or give up 97.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Cisco Systems  vs.  Plastic2Oil

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.

Plastic2Oil

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plastic2Oil are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Plastic2Oil demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Plastic2Oil

The main advantage of trading using opposite Cisco Systems and Plastic2Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Plastic2Oil 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 Plastic2Oil will offset losses from the drop in Plastic2Oil's long position.

The idea behind Cisco Systems and Plastic2Oil 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.