Correlation Between CARSALES and Cisco Systems

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

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

Diversification Opportunities for CARSALES and Cisco Systems

-0.61

Correlation Coefficient

CARSALES  Cisco Systems

Excellent diversification

The 3 months correlation between CARSALES and Cisco is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and CARSALES 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 CARSALESCOM are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of CARSALES i.e., CARSALES and Cisco Systems go up and down completely randomly.

Pair Corralation between CARSALES and Cisco Systems

Assuming the 90 days trading horizon CARSALESCOM is expected to under-perform the Cisco Systems. But the stock apears to be less risky and, when comparing its historical volatility, CARSALESCOM is 1.18 times less risky than Cisco Systems. The stock trades about -0.11 of its potential returns per unit of risk. The Cisco Systems is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  5,701  in Cisco Systems on July 26, 2025 and sell it today you would earn a total of  370.00  from holding Cisco Systems or generate 6.49% return on investment over 90 days.

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

CARSALESCOM  vs.  Cisco Systems

CARSALESCOM

Risk-Adjusted Performance

Weakest

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALES is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite nearly stable basic indicators, Cisco Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CARSALES and Cisco Systems

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

The idea behind CARSALESCOM and Cisco Systems 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.