Correlation Between Viavi Solutions and Juniper Networks

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

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

Diversification Opportunities for Viavi Solutions and Juniper Networks

-0.71

Correlation Coefficient

Viavi Solutions  Juniper Networks

Pay attention - limited upside

The 3 months correlation between Viavi and Juniper is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Viavi Solutions and Juniper Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Juniper Networks and Viavi Solutions 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 Viavi Solutions 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 Viavi Solutions i.e., Viavi Solutions and Juniper Networks go up and down completely randomly.

Pair Corralation between Viavi Solutions and Juniper Networks

Given the investment horizon of 90 days Viavi Solutions is expected to generate 2.8 times more return on investment than Juniper Networks. However, Viavi Solutions is 2.8 times more volatile than Juniper Networks. It trades about 0.07 of its potential returns per unit of risk. Juniper Networks is currently generating about -0.03 per unit of risk. If you would invest  1,008  in Viavi Solutions on December 29, 2024 and sell it today you would earn a total of  118.00  from holding Viavi Solutions or generate 11.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Viavi Solutions  vs.  Juniper Networks

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

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 Viavi Solutions and Juniper Networks

The main advantage of trading using opposite Viavi Solutions and Juniper Networks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viavi Solutions 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 Viavi Solutions 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.