Correlation Between Barloworld and Juniper Networks

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

By analyzing existing cross correlation between Barloworld Ltd ADR and Juniper Networks, you can compare the effects of market volatilities on Barloworld and Juniper Networks 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 Barloworld with a short position of Juniper Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barloworld and Juniper Networks.

Diversification Opportunities for Barloworld and Juniper Networks

0.44

Correlation Coefficient

Barloworld  Juniper Networks

Very weak diversification

The 3 months correlation between Barloworld and Juniper is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Barloworld Ltd ADR and Juniper Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juniper Networks and Barloworld 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 Barloworld Ltd ADR are associated (or correlated) with Juniper Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Juniper Networks has no effect on the direction of Barloworld i.e., Barloworld and Juniper Networks go up and down completely randomly.

Pair Corralation between Barloworld and Juniper Networks

Assuming the 90 days horizon Barloworld Ltd ADR is expected to under-perform the Juniper Networks. In addition to that, Barloworld is 3.48 times more volatile than Juniper Networks. It trades about -0.02 of its total potential returns per unit of risk. Juniper Networks is currently generating about -0.03 per unit of volatility. If you would invest  3,712  in Juniper Networks on December 30, 2024 and sell it today you would lose (100.00) from holding Juniper Networks or give up 2.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

Barloworld Ltd ADR  vs.  Juniper Networks

Barloworld ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Barloworld Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Barloworld is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Juniper Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Juniper Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Juniper Networks is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Barloworld and Juniper Networks

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

The idea behind Barloworld Ltd ADR and Juniper Networks 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.