Correlation Between Citigroup and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Cisco Systems, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Cisco Systems.
Diversification Opportunities for Citigroup and Cisco Systems
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Cisco is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Cisco Systems go up and down completely randomly.
Pair Corralation between Citigroup and Cisco Systems
Taking into account the 90-day investment horizon Citigroup is expected to generate 1.07 times more return on investment than Cisco Systems. However, Citigroup is 1.07 times more volatile than Cisco Systems. It trades about 0.18 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.18 per unit of risk. If you would invest 10,105 in Citigroup on September 24, 2025 and sell it today you would earn a total of 1,835 from holding Citigroup or generate 18.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Cisco Systems
Performance |
| Timeline |
| Citigroup |
| Cisco Systems |
Citigroup and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Cisco Systems
The main advantage of trading using opposite Citigroup and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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. International Business Machines | Cisco Systems vs. SAP SE ADR | Cisco Systems vs. Micron Technology | Cisco Systems vs. Salesforce |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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