Correlation Between Motorola Solutions and Aviat Networks

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

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

Diversification Opportunities for Motorola Solutions and Aviat Networks

0.42

Correlation Coefficient

Motorola Solutions  Aviat Networks

Very weak diversification

The 3 months correlation between Motorola and Aviat is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Aviat Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviat Networks 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 Aviat Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviat Networks has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Aviat Networks go up and down completely randomly.

Pair Corralation between Motorola Solutions and Aviat Networks

Considering the 90-day investment horizon Motorola Solutions is expected to generate 0.37 times more return on investment than Aviat Networks. However, Motorola Solutions is 2.68 times less risky than Aviat Networks. It trades about 0.02 of its potential returns per unit of risk. Aviat Networks is currently generating about -0.17 per unit of risk. If you would invest  35,230  in Motorola Solutions on February 5, 2024 and sell it today you would earn a total of  140.00  from holding Motorola Solutions or generate 0.4% return on investment over 90 days.

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

Motorola Solutions  vs.  Aviat Networks

Motorola Solutions

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Motorola Solutions may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Aviat Networks

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aviat Networks are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aviat Networks is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Motorola Solutions and Aviat Networks

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

The idea behind Motorola Solutions and Aviat Networks 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.