Correlation Between Cisco Systems and Blackberry

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

Diversification Opportunities for Cisco Systems and Blackberry

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cisco and Blackberry is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Blackberry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackberry 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 Blackberry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackberry has no effect on the direction of Cisco Systems i.e., Cisco Systems and Blackberry go up and down completely randomly.

Pair Corralation between Cisco Systems and Blackberry

Given the investment horizon of 90 days Cisco Systems is expected to generate 4.41 times less return on investment than Blackberry. But when comparing it to its historical volatility, Cisco Systems is 3.52 times less risky than Blackberry. It trades about 0.03 of its potential returns per unit of risk. Blackberry is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  523.00  in Blackberry on May 20, 2022 and sell it today you would earn a total of  154.00  from holding Blackberry or generate 29.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Blackberry

 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

Blackberry 
Blackberry Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Blackberry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal fundamental drivers, Blackberry sustained solid returns over the last few months and may actually be approaching a breakup point.

Blackberry Price Channel

Cisco Systems and Blackberry Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Blackberry

The main advantage of trading using opposite Cisco Systems and Blackberry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Blackberry 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 Blackberry will offset losses from the drop in Blackberry's long position.
The idea behind Cisco Systems and Blackberry 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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