Correlation Between Cisco Systems and TE Connectivity

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

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

Diversification Opportunities for Cisco Systems and TE Connectivity

0.71

Correlation Coefficient

Cisco Systems  TE Connectivity

Poor diversification

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

Pair Corralation between Cisco Systems and TE Connectivity

Given the investment horizon of 90 days Cisco Systems is expected to generate 5.1 times less return on investment than TE Connectivity. But when comparing it to its historical volatility, Cisco Systems is 1.48 times less risky than TE Connectivity. It trades about 0.06 of its potential returns per unit of risk. TE Connectivity is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  16,216  in TE Connectivity on May 18, 2025 and sell it today you would earn a total of  4,055  from holding TE Connectivity or generate 25.01% return on investment over 90 days.

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

Cisco Systems  vs.  TE Connectivity

Cisco Systems

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

TE Connectivity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TE Connectivity are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, TE Connectivity disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and TE Connectivity

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

The idea behind Cisco Systems and TE Connectivity 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.