Correlation Between Cisco Systems and Smith Nephew

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

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

Diversification Opportunities for Cisco Systems and Smith Nephew

-0.75

Correlation Coefficient

Cisco Systems  Smith Nephew

Pay attention - limited upside

The 3 months correlation between Cisco and Smith is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Smith Nephew SNATS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Nephew SNATS 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 Smith Nephew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Nephew SNATS has no effect on the direction of Cisco Systems i.e., Cisco Systems and Smith Nephew go up and down completely randomly.

Pair Corralation between Cisco Systems and Smith Nephew

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.73 times more return on investment than Smith Nephew. However, Cisco Systems is 1.38 times less risky than Smith Nephew. It trades about 0.16 of its potential returns per unit of risk. Smith Nephew SNATS is currently generating about -0.07 per unit of risk. If you would invest  6,739  in Cisco Systems on September 2, 2025 and sell it today you would earn a total of  955.00  from holding Cisco Systems or generate 14.17% return on investment over 90 days.

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

Cisco Systems  vs.  Smith Nephew SNATS

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Cisco Systems displayed solid returns over the last few months and may actually be approaching a breakup point.

Smith Nephew SNATS

Risk-Adjusted Performance

Weakest

Over the last 90 days Smith Nephew SNATS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cisco Systems and Smith Nephew

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

The idea behind Cisco Systems and Smith Nephew SNATS 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.