Correlation Between Cisco Systems and COMCAST

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

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

Diversification Opportunities for Cisco Systems and COMCAST

-0.75

Correlation Coefficient

Cisco Systems  COMCAST

Pay attention - limited upside

The 3 months correlation between Cisco and COMCAST is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and COMCAST P NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMCAST P NEW 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 COMCAST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMCAST P NEW has no effect on the direction of Cisco Systems i.e., Cisco Systems and COMCAST go up and down completely randomly.

Pair Corralation between Cisco Systems and COMCAST

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.89 times more return on investment than COMCAST. However, Cisco Systems is 1.12 times less risky than COMCAST. It trades about 0.29 of its potential returns per unit of risk. COMCAST P NEW is currently generating about -0.13 per unit of risk. If you would invest  4,932  in Cisco Systems on September 4, 2024 and sell it today you would earn a total of  1,011  from holding Cisco Systems or generate 20.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	87.5%
Values	Daily Returns

Cisco Systems  vs.  COMCAST P NEW

Cisco Systems

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 22 (%) 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.

COMCAST P NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COMCAST P NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for COMCAST P NEW investors.

Pair Trading with Cisco Systems and COMCAST

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

The idea behind Cisco Systems and COMCAST P NEW 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.