Correlation Between Motorola Solutions and Infinera

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

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

Diversification Opportunities for Motorola Solutions and Infinera

0.34

Correlation Coefficient

Motorola Solutions  Infinera

Weak diversification

The 3 months correlation between Motorola and Infinera is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Infinera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinera 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 Infinera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinera has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Infinera go up and down completely randomly.

Pair Corralation between Motorola Solutions and Infinera

Considering the 90-day investment horizon Motorola Solutions is expected to generate 1.42 times more return on investment than Infinera. However, Motorola Solutions is 1.42 times more volatile than Infinera. It trades about 0.16 of its potential returns per unit of risk. Infinera is currently generating about 0.12 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Motorola Solutions  vs.  Infinera

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.

Infinera

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Infinera are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Infinera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Motorola Solutions and Infinera

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

The idea behind Motorola Solutions and Infinera 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.