Correlation Between Cisco Systems and GreenSky

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

Diversification Opportunities for Cisco Systems and GreenSky

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Cisco and GreenSky is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and GreenSky Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenSky 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 GreenSky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenSky has no effect on the direction of Cisco Systems i.e., Cisco Systems and GreenSky go up and down completely randomly.

Pair Corralation between Cisco Systems and GreenSky

Given the investment horizon of 90 days Cisco Systems is expected to under-perform the GreenSky. But the stock apears to be less risky and, when comparing its historical volatility, Cisco Systems is 2.79 times less risky than GreenSky. The stock trades about -0.04 of its potential returns per unit of risk. The GreenSky is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  783.00  in GreenSky on May 17, 2022 and sell it today you would earn a total of  237.00  from holding GreenSky or generate 30.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy63.05%
ValuesDaily Returns

Cisco Systems  vs.  GreenSky Inc

 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

GreenSky 
GreenSky Performance
0 of 100
Over the last 90 days GreenSky has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, GreenSky is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cisco Systems and GreenSky Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and GreenSky

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

Cisco Systems

Pair trading matchups for Cisco Systems

The idea behind Cisco Systems and GreenSky 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.

GreenSky

Pair trading matchups for GreenSky

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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 GreenSky 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. GreenSky'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, GreenSky'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 GreenSky.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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