Correlation Between Belden and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both Belden 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 Belden and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Belden Inc and Motorola Solutions, you can compare the effects of market volatilities on Belden 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 Belden with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belden and Motorola Solutions.
Diversification Opportunities for Belden and Motorola Solutions
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Belden and Motorola is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and Belden 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 Belden Inc 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 Belden i.e., Belden and Motorola Solutions go up and down completely randomly.
Pair Corralation between Belden and Motorola Solutions
Considering the 90-day investment horizon Belden is expected to generate 1.33 times less return on investment than Motorola Solutions. In addition to that, Belden is 2.1 times more volatile than Motorola Solutions. It trades about 0.05 of its total potential returns per unit of risk. Motorola Solutions is currently generating about 0.14 per unit of volatility. If you would invest 25,303 in Motorola Solutions on August 27, 2024 and sell it today you would earn a total of 24,787 from holding Motorola Solutions or generate 97.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Belden Inc vs. Motorola Solutions
Performance |
| Timeline |
| Belden Inc |
| Motorola Solutions |
Belden and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Belden and Motorola Solutions
The main advantage of trading using opposite Belden and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Belden 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 Belden Inc 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.| Motorola Solutions vs. Ciena Corp | Motorola Solutions vs. Extreme Networks | Motorola Solutions vs. Hewlett Packard Enterprise | Motorola Solutions vs. NETGEAR |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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