Correlation Between Cisco Systems and Global X

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

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

Diversification Opportunities for Cisco Systems and Global X

0.96

Correlation Coefficient

Cisco Systems  Global X

Almost no diversification

The 3 months correlation between Cisco and Global is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of Cisco Systems i.e., Cisco Systems and Global X go up and down completely randomly.

Pair Corralation between Cisco Systems and Global X

Assuming the 90 days trading horizon Cisco Systems is expected to generate 0.99 times more return on investment than Global X. However, Cisco Systems is 1.01 times less risky than Global X. It trades about 0.3 of its potential returns per unit of risk. Global X Funds is currently generating about 0.21 per unit of risk. If you would invest  5,507  in Cisco Systems on September 13, 2024 and sell it today you would earn a total of  1,557  from holding Cisco Systems or generate 28.27% return on investment over 90 days.

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

Cisco Systems  vs.  Global X Funds

Cisco Systems

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Cisco Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Global X Funds

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Global X

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

The idea behind Cisco Systems and Global X Funds 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.