Correlation Between Cisco Systems and HireRight Holdings

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

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

Diversification Opportunities for Cisco Systems and HireRight Holdings

0.69

Correlation Coefficient

Cisco Systems  HireRight Holdings

Poor diversification

The 3 months correlation between Cisco and HireRight is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and HireRight Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HireRight Holdings 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 HireRight Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HireRight Holdings Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and HireRight Holdings go up and down completely randomly.

Pair Corralation between Cisco Systems and HireRight Holdings

If you would invest  5,583  in Cisco Systems on September 5, 2024 and sell it today you would earn a total of  365.00  from holding Cisco Systems or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

Cisco Systems  vs.  HireRight Holdings Corp

Cisco Systems

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 25 (%) 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.

HireRight Holdings Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HireRight Holdings Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HireRight Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cisco Systems and HireRight Holdings

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

The idea behind Cisco Systems and HireRight Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..