Correlation Between Motorola Solutions and Clearfield

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

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

Diversification Opportunities for Motorola Solutions and Clearfield

-0.78

Correlation Coefficient

Motorola Solutions  Clearfield

Pay attention - limited upside

The 3 months correlation between Motorola and Clearfield is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Clearfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearfield 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 Clearfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearfield has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Clearfield go up and down completely randomly.

Pair Corralation between Motorola Solutions and Clearfield

Considering the 90-day investment horizon Motorola Solutions is expected to generate 0.48 times more return on investment than Clearfield. However, Motorola Solutions is 2.06 times less risky than Clearfield. It trades about 0.16 of its potential returns per unit of risk. Clearfield is currently generating about -0.09 per unit of risk. If you would invest  43,939  in Motorola Solutions on September 2, 2024 and sell it today you would earn a total of  6,031  from holding Motorola Solutions or generate 13.73% 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.  Clearfield

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 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Clearfield

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clearfield has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Motorola Solutions and Clearfield

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

The idea behind Motorola Solutions and Clearfield 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.