Correlation Between Cisco Systems and Xinjiang Goldwind

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

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

Diversification Opportunities for Cisco Systems and Xinjiang Goldwind

0.76

Correlation Coefficient

Cisco Systems  Xinjiang Goldwind

Poor diversification

The 3 months correlation between Cisco and Xinjiang is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Xinjiang Goldwind Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinjiang Goldwind Science 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 Xinjiang Goldwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinjiang Goldwind Science has no effect on the direction of Cisco Systems i.e., Cisco Systems and Xinjiang Goldwind go up and down completely randomly.

Pair Corralation between Cisco Systems and Xinjiang Goldwind

Given the investment horizon of 90 days Cisco Systems is expected to generate 3.19 times less return on investment than Xinjiang Goldwind. But when comparing it to its historical volatility, Cisco Systems is 6.71 times less risky than Xinjiang Goldwind. It trades about 0.29 of its potential returns per unit of risk. Xinjiang Goldwind Science is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Xinjiang Goldwind Science on September 4, 2024 and sell it today you would earn a total of  36.00  from holding Xinjiang Goldwind Science or generate 59.02% return on investment over 90 days.

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

Cisco Systems  vs.  Xinjiang Goldwind Science

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.

Xinjiang Goldwind Science

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xinjiang Goldwind Science are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Xinjiang Goldwind reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Xinjiang Goldwind

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

The idea behind Cisco Systems and Xinjiang Goldwind Science 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .