Correlation Between Knowles Corp and Cisco Systems

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

Diversification Opportunities for Knowles Corp and Cisco Systems

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between Knowles and Cisco is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Knowles Corp and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Knowles Corp 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 Knowles Corp 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 Knowles Corp i.e., Knowles Corp and Cisco Systems go up and down completely randomly.

Pair Corralation between Knowles Corp and Cisco Systems

Allowing for the 90-day total investment horizon Knowles Corp is expected to under-perform the Cisco Systems. In addition to that, Knowles Corp is 2.92 times more volatile than Cisco Systems. It trades about -0.07 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.33 per unit of volatility. If you would invest  4,260  in Cisco Systems on May 19, 2022 and sell it today you would earn a total of  406.00  from holding Cisco Systems or generate 9.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Knowles Corp  vs.  Cisco Systems

 Performance (%) 
       Timeline  
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 latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Knowles Price Channel

Cisco Systems 
Cisco Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental indicators, Cisco Systems disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cisco Price Channel

Knowles Corp and Cisco Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Knowles Corp and Cisco Systems

The main advantage of trading using opposite Knowles Corp and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knowles Corp 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.
The idea behind Knowles Corp 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.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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