Correlation Between Cisco Systems and Silicon Laboratories
Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Silicon Laboratories 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 Silicon Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Silicon Laboratories, you can compare the effects of market volatilities on Cisco Systems and Silicon Laboratories 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 Silicon Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Silicon Laboratories.
Diversification Opportunities for Cisco Systems and Silicon Laboratories
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cisco and Silicon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Silicon Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Laboratories 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 Silicon Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Laboratories has no effect on the direction of Cisco Systems i.e., Cisco Systems and Silicon Laboratories go up and down completely randomly.
Pair Corralation between Cisco Systems and Silicon Laboratories
Given the investment horizon of 90 days Cisco Systems is expected to generate 2.12 times less return on investment than Silicon Laboratories. But when comparing it to its historical volatility, Cisco Systems is 2.47 times less risky than Silicon Laboratories. It trades about 0.23 of its potential returns per unit of risk. Silicon Laboratories is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 9,941 in Silicon Laboratories on April 9, 2025 and sell it today you would earn a total of 4,075 from holding Silicon Laboratories or generate 40.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Silicon Laboratories
Performance |
| Timeline |
| Cisco Systems |
| Silicon Laboratories |
Cisco Systems and Silicon Laboratories Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Silicon Laboratories
The main advantage of trading using opposite Cisco Systems and Silicon Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Silicon Laboratories 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 Silicon Laboratories will offset losses from the drop in Silicon Laboratories' long position.| Cisco Systems vs. Fabrinet | Cisco Systems vs. Kimball Electronics | Cisco Systems vs. Knowles Cor | Cisco Systems vs. Deswell Industries |
| Silicon Laboratories vs. Prudential Financial 4125 | Silicon Laboratories vs. Kaltura | Silicon Laboratories vs. Bill Com Holdings | Silicon Laboratories vs. Lincoln National |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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