Correlation Between Healthequity and Cisco Systems

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

Diversification Opportunities for Healthequity and Cisco Systems

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Healthequity and Cisco is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Healthequity and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Healthequity 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 Healthequity 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 Healthequity i.e., Healthequity and Cisco Systems go up and down completely randomly.

Pair Corralation between Healthequity and Cisco Systems

Considering the 90-day investment horizon Healthequity is expected to generate 0.99 times more return on investment than Cisco Systems. However, Healthequity is 1.01 times less risky than Cisco Systems. It trades about 0.2 of its potential returns per unit of risk. Cisco Systems is currently generating about -0.14 per unit of risk. If you would invest  6,344  in Healthequity on July 7, 2022 and sell it today you would earn a total of  484.00  from holding Healthequity or generate 7.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Healthequity  vs.  Cisco Systems

 Performance (%) 
       Timeline  
Healthequity 
Healthequity Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Healthequity are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Healthequity may actually be approaching a critical reversion point that can send shares even higher in November 2022.

Healthequity 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

Healthequity and Cisco Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Healthequity and Cisco Systems

The main advantage of trading using opposite Healthequity and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthequity 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.
Healthequity vs. Amazon Inc
The idea behind Healthequity 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. 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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