Correlation Between Motorola Solutions and MOTOROLA SOLTN

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

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

Diversification Opportunities for Motorola Solutions and MOTOROLA SOLTN

0.88

Correlation Coefficient

Motorola Solutions  MOTOROLA SOLTN

Very poor diversification

The 3 months correlation between Motorola and MOTOROLA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and MOTOROLA SOLTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOTOROLA SOLTN and Motorola 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 Motorola Solutions are associated (or correlated) with MOTOROLA SOLTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOTOROLA SOLTN has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and MOTOROLA SOLTN go up and down completely randomly.

Pair Corralation between Motorola Solutions and MOTOROLA SOLTN

Assuming the 90 days trading horizon Motorola Solutions is expected to generate 1.32 times more return on investment than MOTOROLA SOLTN. However, Motorola Solutions is 1.32 times more volatile than MOTOROLA SOLTN . It trades about 0.17 of its potential returns per unit of risk. MOTOROLA SOLTN is currently generating about 0.21 per unit of risk. If you would invest  62,582  in Motorola Solutions on September 4, 2024 and sell it today you would earn a total of  13,063  from holding Motorola Solutions or generate 20.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.85%
Values	Daily Returns

Motorola Solutions  vs.  MOTOROLA SOLTN

Motorola Solutions

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Motorola Solutions sustained solid returns over the last few months and may actually be approaching a breakup point.

MOTOROLA SOLTN

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MOTOROLA SOLTN are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, MOTOROLA SOLTN unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Motorola Solutions and MOTOROLA SOLTN

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

The idea behind Motorola Solutions and MOTOROLA SOLTN 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.