Correlation Between Vmware and Cisco Systems

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

Diversification Opportunities for Vmware and Cisco Systems

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vmware and Cisco is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vmware Inc and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Vmware 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 Vmware Inc 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 Vmware i.e., Vmware and Cisco Systems go up and down completely randomly.

Pair Corralation between Vmware and Cisco Systems

Considering the 90-day investment horizon Vmware Inc is expected to generate 1.35 times more return on investment than Cisco Systems. However, Vmware is 1.35 times more volatile than Cisco Systems. It trades about 0.01 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.0 per unit of risk. If you would invest  11,340  in Vmware Inc on April 5, 2022 and sell it today you would earn a total of  66.00  from holding Vmware Inc or generate 0.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Vmware Inc  vs.  Cisco Systems

 Performance (%) 
      Timeline 
Vmware Inc 
Vmware Performance
0 of 100
Over the last 90 days Vmware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Vmware is not utilizing all of its potentials. The latest 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 
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 conflicting 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
0.0357
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 and Cisco Systems Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Vmware and Cisco Systems

The main advantage of trading using opposite Vmware and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vmware 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 Vmware Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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