Correlation Between Cisco Systems and Viavi Solutions

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

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

Diversification Opportunities for Cisco Systems and Viavi Solutions

-0.16

Correlation Coefficient

Cisco Systems  Viavi Solutions

Good diversification

The 3 months correlation between Cisco and Viavi is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of Cisco Systems i.e., Cisco Systems and Viavi Solutions go up and down completely randomly.

Pair Corralation between Cisco Systems and Viavi Solutions

Given the investment horizon of 90 days Cisco Systems is expected to generate 26.85 times less return on investment than Viavi Solutions. But when comparing it to its historical volatility, Cisco Systems is 1.3 times less risky than Viavi Solutions. It trades about 0.01 of its potential returns per unit of risk. Viavi Solutions is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,038  in Viavi Solutions on July 2, 2025 and sell it today you would earn a total of  232.00  from holding Viavi Solutions or generate 22.35% return on investment over 90 days.

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

Cisco Systems  vs.  Viavi Solutions

Cisco Systems

Risk-Adjusted Performance

Weakest

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Viavi Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Viavi Solutions

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

The idea behind Cisco Systems and Viavi Solutions 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.