Correlation Between Hewlett Packard and Cisco Systems

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

Diversification Opportunities for Hewlett Packard and Cisco Systems

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Hewlett and Cisco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Hewlett Packard 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 Hewlett Packard Enterprise are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Hewlett Packard i.e., Hewlett Packard and Cisco Systems go up and down completely randomly.

Pair Corralation between Hewlett Packard and Cisco Systems

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to under-perform the Cisco Systems. But the stock apears to be less risky and, when comparing its historical volatility, Hewlett Packard Enterprise is 1.09 times less risky than Cisco Systems. The stock trades about -0.48 of its potential returns per unit of risk. The Cisco Systems is currently generating about -0.39 of returns per unit of risk over similar time horizon. If you would invest  4,571  in Cisco Systems on June 28, 2022 and sell it today you would lose (513.00)  from holding Cisco Systems or give up 11.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Hewlett Packard Enterprise  vs.  Cisco Systems

 Performance (%) 
       Timeline  
Hewlett Packard Ente 
Hewlett Performance
0 of 100
Over the last 90 days Hewlett Packard Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Hewlett Price Channel

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

Hewlett Packard and Cisco Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hewlett Packard and Cisco Systems

The main advantage of trading using opposite Hewlett Packard and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard position performs unexpectedly, Cisco Systems 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 Cisco Systems will offset losses from the drop in Cisco Systems' long position.
Hewlett Packard vs. Kibush Capital Corp
The idea behind Hewlett Packard Enterprise and Cisco Systems 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.
Cisco Systems vs. Kibush Capital Corp
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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