Correlation Between Motorola Solutions and AXT

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

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

Diversification Opportunities for Motorola Solutions and AXT

-0.62

Correlation Coefficient

Motorola Solutions  AXT

Excellent diversification

The 3 months correlation between Motorola and AXT is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc 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 AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and AXT go up and down completely randomly.

Pair Corralation between Motorola Solutions and AXT

Considering the 90-day investment horizon Motorola Solutions is expected to generate 0.2 times more return on investment than AXT. However, Motorola Solutions is 5.08 times less risky than AXT. It trades about 0.11 of its potential returns per unit of risk. AXT Inc is currently generating about 0.0 per unit of risk. If you would invest  25,476  in Motorola Solutions on September 30, 2024 and sell it today you would earn a total of  21,257  from holding Motorola Solutions or generate 83.44% return on investment over 90 days.

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

Motorola Solutions  vs.  AXT Inc

Motorola Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Motorola Solutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

AXT Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, AXT is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Motorola Solutions and AXT

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

The idea behind Motorola Solutions and AXT Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.