Correlation Between Motorola Solutions and Viavi Solutions

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

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

Diversification Opportunities for Motorola Solutions and Viavi Solutions

-0.07

Correlation Coefficient

Motorola Solutions  Viavi Solutions

Good diversification

The 3 months correlation between Motorola and Viavi is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Viavi Solutions go up and down completely randomly.

Pair Corralation between Motorola Solutions and Viavi Solutions

Considering the 90-day investment horizon Motorola Solutions is expected to under-perform the Viavi Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Motorola Solutions is 2.21 times less risky than Viavi Solutions. The stock trades about -0.07 of its potential returns per unit of risk. The Viavi Solutions is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,008  in Viavi Solutions on December 29, 2024 and sell it today you would earn a total of  118.00  from holding Viavi Solutions or generate 11.71% return on investment over 90 days.

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

Motorola Solutions  vs.  Viavi Solutions

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 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.

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Motorola Solutions and Viavi Solutions

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

The idea behind Motorola Solutions and Viavi Solutions 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.