Correlation Between Microsoft and MOTOROLA SOLTN

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and MOTOROLA SOLTN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and MOTOROLA SOLTN , you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of MOTOROLA SOLTN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and MOTOROLA SOLTN.

Diversification Opportunities for Microsoft and MOTOROLA SOLTN

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Microsoft and MOTOROLA is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and MOTOROLA SOLTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOTOROLA SOLTN and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and MOTOROLA SOLTN go up and down completely randomly.

Pair Corralation between Microsoft and MOTOROLA SOLTN

Assuming the 90 days trading horizon Microsoft is expected to generate 1.21 times more return on investment than MOTOROLA SOLTN. However, Microsoft is 1.21 times more volatile than MOTOROLA SOLTN . It trades about 0.13 of its potential returns per unit of risk. MOTOROLA SOLTN is currently generating about -0.29 per unit of risk. If you would invest  40,700  in Microsoft on September 27, 2024 and sell it today you would earn a total of  1,130  from holding Microsoft or generate 2.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Microsoft  vs.  MOTOROLA SOLTN

 Performance 
       Timeline  
Microsoft 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Microsoft may actually be approaching a critical reversion point that can send shares even higher in January 2025.
MOTOROLA SOLTN 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in MOTOROLA SOLTN are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MOTOROLA SOLTN may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Microsoft and MOTOROLA SOLTN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft and MOTOROLA SOLTN

The main advantage of trading using opposite Microsoft and MOTOROLA SOLTN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

Other Complementary Tools

Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Technical Analysis
Check basic technical indicators and analysis based on most latest market data