Correlation Between Cisco Systems and Hoya Corp

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

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

Diversification Opportunities for Cisco Systems and Hoya Corp

-0.44

Correlation Coefficient

Cisco Systems  Hoya Corp

Very good diversification

The 3 months correlation between Cisco and Hoya is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Hoya Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoya Corp 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 Hoya Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoya Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Hoya Corp go up and down completely randomly.

Pair Corralation between Cisco Systems and Hoya Corp

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.57 times more return on investment than Hoya Corp. However, Cisco Systems is 1.74 times less risky than Hoya Corp. It trades about 0.27 of its potential returns per unit of risk. Hoya Corp is currently generating about -0.04 per unit of risk. If you would invest  4,968  in Cisco Systems on September 3, 2024 and sell it today you would earn a total of  953.00  from holding Cisco Systems or generate 19.18% return on investment over 90 days.

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

Cisco Systems  vs.  Hoya Corp

Cisco Systems

Risk-Adjusted Performance

21 of 100

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.

Hoya Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoya Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hoya Corp 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 Hoya Corp

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

The idea behind Cisco Systems and Hoya Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.