Correlation Between Cisco Systems and Flex

Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Flex 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 Flex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and Flex, you can compare the effects of market volatilities on Cisco Systems and Flex 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 Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Flex.

Diversification Opportunities for Cisco Systems and Flex

0.77

Correlation Coefficient

Cisco Systems  Flex

Poor diversification

The 3 months correlation between Cisco and Flex is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex 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 Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of Cisco Systems i.e., Cisco Systems and Flex go up and down completely randomly.

Pair Corralation between Cisco Systems and Flex

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.51 times more return on investment than Flex. However, Cisco Systems is 1.96 times less risky than Flex. It trades about -0.03 of its potential returns per unit of risk. Flex is currently generating about -0.05 per unit of risk. If you would invest  6,216  in Cisco Systems on February 5, 2025 and sell it today you would lose (294.00) from holding Cisco Systems or give up 4.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cisco Systems  vs.  Flex

Cisco Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Cisco Systems is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Cisco Systems and Flex

The main advantage of trading using opposite Cisco Systems and Flex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Flex 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 Flex will offset losses from the drop in Flex's long position.

The idea behind Cisco Systems and Flex 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.

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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 the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.