Correlation Between IDEXX Laboratories, and Cisco Systems

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

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

Diversification Opportunities for IDEXX Laboratories, and Cisco Systems

0.85

Correlation Coefficient

IDEXX Laboratories,  Cisco Systems

Very poor diversification

The 3 months correlation between IDEXX and Cisco is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding IDEXX Laboratories, and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and IDEXX Laboratories, 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 IDEXX Laboratories, 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 IDEXX Laboratories, i.e., IDEXX Laboratories, and Cisco Systems go up and down completely randomly.

Pair Corralation between IDEXX Laboratories, and Cisco Systems

Assuming the 90 days trading horizon IDEXX Laboratories, is expected to generate 0.98 times more return on investment than Cisco Systems. However, IDEXX Laboratories, is 1.03 times less risky than Cisco Systems. It trades about 0.21 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.19 per unit of risk. If you would invest  47,431  in IDEXX Laboratories, on April 21, 2025 and sell it today you would earn a total of  11,488  from holding IDEXX Laboratories, or generate 24.22% return on investment over 90 days.

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

IDEXX Laboratories,  vs.  Cisco Systems

IDEXX Laboratories,

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDEXX Laboratories, are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, IDEXX Laboratories, sustained solid returns over the last few months and may actually be approaching a breakup point.

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Cisco Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IDEXX Laboratories, and Cisco Systems

The main advantage of trading using opposite IDEXX Laboratories, and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEXX Laboratories, 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 IDEXX Laboratories, 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 the Bonds Directory module to find actively traded corporate debentures issued by US companies.