Startrader

$JNPR or $CSCO? Which will perform better in the next 7 days?

NASDAQ:CSCO   CISCO SYS INC
109 0 2
Pair Options Forecast: JNPR             will outperform CSCO             in the next 7 day
ANALYSIS: Cointegration, Correlation and Technical
Strategy: Elliot Wave Principle http://www.bitcoinprice.mobi/prediction/

Trading pairs JNPR             vs CSCO             which has moved from its correlation can be done based on cointegration or technical analyzing the prices of the stock pairs and tries to profit from the mean-reversion proces.

Cointegration (right chart): look for the divergence pairs that have moved away from each other and then back together in a regular pattern:

1. Identify a gap.
2. Make a trade assuming the stocks will return to their correlated path

The strategy is therefore to identify when the “gap” is created and to trade in the assumption that there is a high probability the gap will close or narrow.
This pairs have a high positive correlation between them, meaning that both stocks historically tend to move together. Generally because they are from the same industry sector and traded in the same market, so the same factors impact them.

Technical Analysis of the spread (left chart):
Cisco move together very closely and has a maximal correlation with Juniper. This means it's profitable when the relative value between the two assets is perturbed from equilibrium, you can take a contrarian position and profit from the spread trading as the prices revert back to their long-run mean.

The trade should be opposite to the “gap”. CSCO             has performed better than JNPR             , in order to close the “gap” JNPR             will now perform better.

Ciprian,
http://google.com/+CiprianPopaIoan
Ideas Scripts Chart
United States
United Kingdom
India
España
Italia
Brasil
Россия
Türkiye
日本
한국
Home Stock Screener Economic Calendar How It Works Chart Features House Rules Moderators For the WEB Widgets Stock Charting Library Priority Support Feature Request Blog & News FAQ Help & Wiki Twitter
Private Messages Chat Ideas Published Followers Following Priority Support Public Profile Profile Settings Billing Sign Out