Correlation Between Padtec Holding and Cisco Systems

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

By analyzing existing cross correlation between Padtec Holding SA and Cisco Systems, you can compare the effects of market volatilities on Padtec Holding and Cisco Systems 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 Padtec Holding with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Padtec Holding and Cisco Systems.

Diversification Opportunities for Padtec Holding and Cisco Systems

-0.74

Correlation Coefficient

Padtec Holding  Cisco Systems

Pay attention - limited upside

The 3 months correlation between Padtec and Cisco is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Padtec Holding SA and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Padtec Holding 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 Padtec Holding SA are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Padtec Holding i.e., Padtec Holding and Cisco Systems go up and down completely randomly.

Pair Corralation between Padtec Holding and Cisco Systems

Assuming the 90 days trading horizon Padtec Holding SA is expected to under-perform the Cisco Systems. In addition to that, Padtec Holding is 2.19 times more volatile than Cisco Systems. It trades about -0.03 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.06 per unit of volatility. If you would invest  4,981  in Cisco Systems on September 4, 2024 and sell it today you would earn a total of  2,184  from holding Cisco Systems or generate 43.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Padtec Holding SA  vs.  Cisco Systems

Padtec Holding SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Padtec Holding SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cisco Systems

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 19 (%) 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.

Pair Trading with Padtec Holding and Cisco Systems

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

The idea behind Padtec Holding SA and Cisco Systems 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.