Correlation Between Cisco Systems and ENTERPRISE

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

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

Diversification Opportunities for Cisco Systems and ENTERPRISE

0.28

Correlation Coefficient

Cisco Systems  ENTERPRISE

Modest diversification

The 3 months correlation between Cisco and ENTERPRISE is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and ENTERPRISE PRODS OPER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTERPRISE PRODS OPER 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 ENTERPRISE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTERPRISE PRODS OPER has no effect on the direction of Cisco Systems i.e., Cisco Systems and ENTERPRISE go up and down completely randomly.

Pair Corralation between Cisco Systems and ENTERPRISE

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.99 times more return on investment than ENTERPRISE. However, Cisco Systems is 1.01 times less risky than ENTERPRISE. It trades about 0.06 of its potential returns per unit of risk. ENTERPRISE PRODS OPER is currently generating about 0.05 per unit of risk. If you would invest  6,354  in Cisco Systems on May 18, 2025 and sell it today you would earn a total of  266.00  from holding Cisco Systems or generate 4.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.58%
Values	Daily Returns

Cisco Systems  vs.  ENTERPRISE PRODS OPER

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.

ENTERPRISE PRODS OPER

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in ENTERPRISE PRODS OPER are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, ENTERPRISE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cisco Systems and ENTERPRISE

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

The idea behind Cisco Systems and ENTERPRISE PRODS OPER 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.