Correlation Between Cisco Systems and Knowles Corp

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Knowles 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 Knowles 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 Knowles Corp, you can compare the effects of market volatilities on Cisco Systems and Knowles 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 Knowles Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Knowles Corp.

Diversification Opportunities for Cisco Systems and Knowles Corp

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Cisco and Knowles is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Knowles Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knowles 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 Knowles Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knowles Corp has no effect on the direction of Cisco Systems i.e., Cisco Systems and Knowles Corp go up and down completely randomly.

Pair Corralation between Cisco Systems and Knowles Corp

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.74 times more return on investment than Knowles Corp. However, Cisco Systems is 1.34 times less risky than Knowles Corp. It trades about -0.28 of its potential returns per unit of risk. Knowles Corp is currently generating about -0.42 per unit of risk. If you would invest  4,472  in Cisco Systems on July 2, 2022 and sell it today you would lose (415.00)  from holding Cisco Systems or give up 9.28% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Knowles 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 quite persistent fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cisco Price Channel

Knowles Corp 
Knowles Performance
0 of 100
Over the last 90 days Knowles Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in October 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Knowles Price Channel

Cisco Systems and Knowles Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Knowles Corp

The main advantage of trading using opposite Cisco Systems and Knowles Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Knowles 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 Knowles Corp will offset losses from the drop in Knowles Corp's long position.
Cisco Systems vs. Amazon Inc
The idea behind Cisco Systems and Knowles 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.
Knowles Corp vs. Amazon Inc
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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