Correlation Between Associated British and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Motorola Solutions, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Motorola Solutions.
Diversification Opportunities for Associated British and Motorola Solutions
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Associated and Motorola is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Motorola Solutions go up and down completely randomly.
Pair Corralation between Associated British and Motorola Solutions
Assuming the 90 days trading horizon Associated British Foods is expected to generate 1.18 times more return on investment than Motorola Solutions. However, Associated British is 1.18 times more volatile than Motorola Solutions. It trades about -0.04 of its potential returns per unit of risk. Motorola Solutions is currently generating about -0.1 per unit of risk. If you would invest 2,717 in Associated British Foods on September 13, 2024 and sell it today you would lose (34.00) from holding Associated British Foods or give up 1.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Motorola Solutions
Performance |
| Timeline |
| Associated British Foods |
| Motorola Solutions |
Associated British and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Motorola Solutions
The main advantage of trading using opposite Associated British and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Hormel Foods | Associated British vs. Superior Plus Corp | Associated British vs. SIVERS SEMICONDUCTORS AB | Associated British vs. NorAm Drilling AS |
| Motorola Solutions vs. PT Indofood Sukses | Motorola Solutions vs. PUBLIC STORAGE PRFO | Motorola Solutions vs. Lery Seafood Group | Motorola Solutions vs. Associated British Foods |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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