Correlation Between InterDigital and Juniper Networks

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

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

Diversification Opportunities for InterDigital and Juniper Networks

-0.62

Correlation Coefficient

InterDigital  Juniper Networks

Excellent diversification

The 3 months correlation between InterDigital and Juniper is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding InterDigital and Juniper Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juniper Networks and InterDigital 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 InterDigital 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 InterDigital i.e., InterDigital and Juniper Networks go up and down completely randomly.

Pair Corralation between InterDigital and Juniper Networks

Given the investment horizon of 90 days InterDigital is expected to generate 2.3 times more return on investment than Juniper Networks. However, InterDigital is 2.3 times more volatile than Juniper Networks. It trades about 0.33 of its potential returns per unit of risk. Juniper Networks is currently generating about -0.13 per unit of risk. If you would invest  13,488  in InterDigital on August 31, 2024 and sell it today you would earn a total of  6,304  from holding InterDigital or generate 46.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

InterDigital  vs.  Juniper Networks

InterDigital

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in InterDigital are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, InterDigital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Juniper Networks

Risk-Adjusted Performance

0 of 100

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 latest unfluctuating performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with InterDigital and Juniper Networks

The main advantage of trading using opposite InterDigital and Juniper Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterDigital 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 InterDigital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.