Correlation Between NetApp and Cisco Systems
Can any of the company-specific risk be diversified away by investing in both NetApp 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 NetApp and Cisco Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NetApp Inc and Cisco Systems, you can compare the effects of market volatilities on NetApp 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 NetApp with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of NetApp and Cisco Systems.
Diversification Opportunities for NetApp and Cisco Systems
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between NetApp and Cisco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and NetApp 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 NetApp 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 NetApp i.e., NetApp and Cisco Systems go up and down completely randomly.
Pair Corralation between NetApp and Cisco Systems
Given the investment horizon of 90 days NetApp Inc is expected to generate 1.38 times more return on investment than Cisco Systems. However, NetApp is 1.38 times more volatile than Cisco Systems. It trades about 0.11 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.1 per unit of risk. If you would invest 8,892 in NetApp Inc on April 1, 2025 and sell it today you would earn a total of 1,680 from holding NetApp Inc or generate 18.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NetApp Inc vs. Cisco Systems
Performance |
| Timeline |
| NetApp Inc |
| Cisco Systems |
NetApp and Cisco Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NetApp and Cisco Systems
The main advantage of trading using opposite NetApp and Cisco Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp 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 NetApp 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.| Cisco Systems vs. Juniper Networks | Cisco Systems vs. Nokia Corp ADR | Cisco Systems vs. Motorola Solutions | Cisco Systems vs. Ciena Corp |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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