Correlation Between Cisco Systems and Vmware

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

Diversification Opportunities for Cisco Systems and Vmware

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between Cisco and Vmware is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Vmware Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vmware Inc 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 Vmware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vmware Inc has no effect on the direction of Cisco Systems i.e., Cisco Systems and Vmware go up and down completely randomly.

Pair Corralation between Cisco Systems and Vmware

Given the investment horizon of 90 days Cisco Systems is expected to under-perform the Vmware. But the stock apears to be less risky and, when comparing its historical volatility, Cisco Systems is 1.53 times less risky than Vmware. The stock trades about -0.14 of its potential returns per unit of risk. The Vmware Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  11,105  in Vmware Inc on April 8, 2022 and sell it today you would earn a total of  191.00  from holding Vmware Inc or generate 1.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Vmware 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 unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in August 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0362
Payout Ratio
0.45
Last Split Factor
2:1
Forward Annual Dividend Rate
1.52
Dividend Date
2022-07-27
Ex Dividend Date
2022-07-05
Last Split Date
2000-03-23

Cisco Price Channel

Vmware Inc 
Vmware Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Vmware Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, Vmware is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Structure and Payout Changes

Payout Ratio
0.0405
Dividend Date
2021-11-01
Ex Dividend Date
2021-11-02

Vmware Price Channel

Cisco Systems and Vmware Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Cisco Systems and Vmware

The main advantage of trading using opposite Cisco Systems and Vmware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Vmware 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 Vmware will offset losses from the drop in Vmware's long position.
The idea behind Cisco Systems and Vmware Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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