Correlation Between Juniper Networks and Gilead Sciences

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

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

Diversification Opportunities for Juniper Networks and Gilead Sciences

0.24

Correlation Coefficient

Juniper Networks  Gilead Sciences

Modest diversification

The 3 months correlation between Juniper and Gilead is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Juniper Networks and Gilead Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gilead Sciences and Juniper Networks 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 Juniper Networks are associated (or correlated) with Gilead Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gilead Sciences has no effect on the direction of Juniper Networks i.e., Juniper Networks and Gilead Sciences go up and down completely randomly.

Pair Corralation between Juniper Networks and Gilead Sciences

Given the investment horizon of 90 days Juniper Networks is expected to generate 1.42 times more return on investment than Gilead Sciences. However, Juniper Networks is 1.42 times more volatile than Gilead Sciences. It trades about 0.15 of its potential returns per unit of risk. Gilead Sciences is currently generating about -0.06 per unit of risk. If you would invest  2,497  in Juniper Networks on January 18, 2024 and sell it today you would earn a total of  1,151  from holding Juniper Networks or generate 46.1% return on investment over 90 days.

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

Juniper Networks  vs.  Gilead Sciences

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 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.

Gilead Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gilead Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Juniper Networks and Gilead Sciences

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

The idea behind Juniper Networks and Gilead Sciences 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.