Correlation Between Comtech Telecommunicatio and Motorola Solutions

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

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

Diversification Opportunities for Comtech Telecommunicatio and Motorola Solutions

-0.23

Correlation Coefficient

Comtech Telecommunicatio  Motorola Solutions

Very good diversification

The 3 months correlation between Comtech and Motorola is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Comtech Telecommunications Cor and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and Comtech Telecommunicatio 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 Comtech Telecommunications Corp are associated (or correlated) with Motorola Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorola Solutions has no effect on the direction of Comtech Telecommunicatio i.e., Comtech Telecommunicatio and Motorola Solutions go up and down completely randomly.

Pair Corralation between Comtech Telecommunicatio and Motorola Solutions

Given the investment horizon of 90 days Comtech Telecommunications Corp is expected to generate 5.5 times more return on investment than Motorola Solutions. However, Comtech Telecommunicatio is 5.5 times more volatile than Motorola Solutions. It trades about 0.06 of its potential returns per unit of risk. Motorola Solutions is currently generating about 0.16 per unit of risk. If you would invest  304.00  in Comtech Telecommunications Corp on September 3, 2024 and sell it today you would earn a total of  35.00  from holding Comtech Telecommunications Corp or generate 11.51% return on investment over 90 days.

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

Comtech Telecommunications Cor  vs.  Motorola Solutions

Comtech Telecommunicatio

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Comtech Telecommunications Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Comtech Telecommunicatio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Motorola Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Motorola Solutions may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Comtech Telecommunicatio and Motorola Solutions

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

The idea behind Comtech Telecommunications Corp and Motorola Solutions 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.