Correlation Between Cisco Systems and Growth Income

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

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

Diversification Opportunities for Cisco Systems and Growth Income

0.55

Correlation Coefficient

Cisco Systems  Growth Income

Very weak diversification

The 3 months correlation between Cisco and Growth is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income 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 Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of Cisco Systems i.e., Cisco Systems and Growth Income go up and down completely randomly.

Pair Corralation between Cisco Systems and Growth Income

Given the investment horizon of 90 days Cisco Systems is expected to generate 1.46 times more return on investment than Growth Income. However, Cisco Systems is 1.46 times more volatile than Growth Income Fund. It trades about 0.27 of its potential returns per unit of risk. Growth Income Fund is currently generating about 0.28 per unit of risk. If you would invest  5,700  in Cisco Systems on April 29, 2025 and sell it today you would earn a total of  1,169  from holding Cisco Systems or generate 20.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Cisco Systems  vs.  Growth Income Fund

Cisco Systems

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 21 (%) 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.

Growth Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Income Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Income showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Growth Income

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

The idea behind Cisco Systems and Growth Income Fund 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.