Correlation Between Motorola Solutions and Credo Technology

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

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

Diversification Opportunities for Motorola Solutions and Credo Technology

-0.13

Correlation Coefficient

Motorola Solutions  Credo Technology

Good diversification

The 3 months correlation between Motorola and Credo is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Credo Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credo Technology 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 Credo Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credo Technology has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Credo Technology go up and down completely randomly.

Pair Corralation between Motorola Solutions and Credo Technology

Considering the 90-day investment horizon Motorola Solutions is expected to generate 0.33 times more return on investment than Credo Technology. However, Motorola Solutions is 3.06 times less risky than Credo Technology. It trades about -0.23 of its potential returns per unit of risk. Credo Technology Group is currently generating about -0.1 per unit of risk. If you would invest  47,261  in Motorola Solutions on December 1, 2024 and sell it today you would lose (4,306) from holding Motorola Solutions or give up 9.11% of portfolio value over 90 days.

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

Motorola Solutions  vs.  Credo Technology Group

Motorola Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Motorola Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Credo Technology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credo Technology Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Credo Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Motorola Solutions and Credo Technology

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

The idea behind Motorola Solutions and Credo Technology Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.