Correlation Between Cisco Systems and APPTECH CORP

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and APPTECH CORP 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 APPTECH CORP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and APPTECH CORP, you can compare the effects of market volatilities on Cisco Systems and APPTECH CORP 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 APPTECH CORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and APPTECH CORP.

Diversification Opportunities for Cisco Systems and APPTECH CORP

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cisco and APPTECH is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and APPTECH CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPTECH 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 APPTECH CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPTECH CORP has no effect on the direction of Cisco Systems i.e., Cisco Systems and APPTECH CORP go up and down completely randomly.

Pair Corralation between Cisco Systems and APPTECH CORP

Given the investment horizon of 90 days Cisco Systems is expected to generate 20.78 times less return on investment than APPTECH CORP. But when comparing it to its historical volatility, Cisco Systems is 9.78 times less risky than APPTECH CORP. It trades about 0.03 of its potential returns per unit of risk. APPTECH CORP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  125.00  in APPTECH CORP on May 17, 2022 and sell it today you would lose (44.00)  from holding APPTECH CORP or give up 35.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  APPTECH CORP

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Cisco Price Channel

APPTECH CORP 
APPTECH Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in APPTECH CORP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, APPTECH CORP showed solid returns over the last few months and may actually be approaching a breakup point.

APPTECH Price Channel

Cisco Systems and APPTECH CORP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and APPTECH CORP

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

Cisco Systems

Pair trading matchups for Cisco Systems

The idea behind Cisco Systems and APPTECH 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.

APPTECH CORP

Pair trading matchups for APPTECH CORP

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against APPTECH CORP as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. APPTECH CORP's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, APPTECH CORP's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to APPTECH CORP.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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