Correlation Between Cisco Systems and Principal Value

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

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

Diversification Opportunities for Cisco Systems and Principal Value

0.89

Correlation Coefficient

Cisco Systems  Principal Value

Very poor diversification

The 3 months correlation between Cisco and Principal is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Principal Value ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Value ETF 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 Principal Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Value ETF has no effect on the direction of Cisco Systems i.e., Cisco Systems and Principal Value go up and down completely randomly.

Pair Corralation between Cisco Systems and Principal Value

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.61 times more return on investment than Principal Value. However, Cisco Systems is 1.61 times more volatile than Principal Value ETF. It trades about 0.19 of its potential returns per unit of risk. Principal Value ETF is currently generating about 0.08 per unit of risk. If you would invest  6,130  in Cisco Systems on May 10, 2025 and sell it today you would earn a total of  860.00  from holding Cisco Systems or generate 14.03% return on investment over 90 days.

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

Cisco Systems  vs.  Principal Value ETF

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 unfluctuating fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Principal Value ETF

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Value ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Principal Value is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and Principal Value

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

The idea behind Cisco Systems and Principal Value ETF 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.