Correlation Between AAC TECHNOLOGHLDGADR and Motorola Solutions

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

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

Diversification Opportunities for AAC TECHNOLOGHLDGADR and Motorola Solutions

0.63

Correlation Coefficient

AAC TECHNOLOGHLDGADR  Motorola Solutions

Poor diversification

The 3 months correlation between AAC and Motorola is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AAC TECHNOLOGHLDGADR and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR are associated (or correlated) with Motorola Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorola Solutions has no effect on the direction of AAC TECHNOLOGHLDGADR i.e., AAC TECHNOLOGHLDGADR and Motorola Solutions go up and down completely randomly.

Pair Corralation between AAC TECHNOLOGHLDGADR and Motorola Solutions

Assuming the 90 days horizon AAC TECHNOLOGHLDGADR is expected to generate 1.07 times less return on investment than Motorola Solutions. In addition to that, AAC TECHNOLOGHLDGADR is 1.83 times more volatile than Motorola Solutions. It trades about 0.17 of its total potential returns per unit of risk. Motorola Solutions is currently generating about 0.33 per unit of volatility. If you would invest  41,450  in Motorola Solutions on September 1, 2024 and sell it today you would earn a total of  6,190  from holding Motorola Solutions or generate 14.93% return on investment over 90 days.

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

AAC TECHNOLOGHLDGADR  vs.  Motorola Solutions

AAC TECHNOLOGHLDGADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AAC TECHNOLOGHLDGADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AAC TECHNOLOGHLDGADR reported solid returns over the last few months and may actually be approaching a breakup point.

Motorola Solutions

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Motorola Solutions reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAC TECHNOLOGHLDGADR and Motorola Solutions

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

The idea behind AAC TECHNOLOGHLDGADR and Motorola 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.