Correlation Between Cisco Systems and Boeing

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

Diversification Opportunities for Cisco Systems and Boeing

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cisco and Boeing is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Boeing Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing Company 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing Company has no effect on the direction of Cisco Systems i.e., Cisco Systems and Boeing go up and down completely randomly.

Pair Corralation between Cisco Systems and Boeing

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.62 times more return on investment than Boeing. However, Cisco Systems is 1.62 times less risky than Boeing. It trades about 0.0 of its potential returns per unit of risk. Boeing Company is currently generating about -0.03 per unit of risk. If you would invest  5,146  in Cisco Systems on May 20, 2022 and sell it today you would lose (184.00)  from holding Cisco Systems or give up 3.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Boeing Company

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Cisco Price Channel

Boeing Company 
Boeing Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Boeing Company are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Boeing sustained solid returns over the last few months and may actually be approaching a breakup point.

Boeing Price Channel

Cisco Systems and Boeing Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Boeing

The main advantage of trading using opposite Cisco Systems and Boeing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Boeing 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 Boeing will offset losses from the drop in Boeing's long position.
The idea behind Cisco Systems and Boeing Company 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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