Correlation Between Cisco Systems and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Motorola Solutions, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Motorola Solutions.
Diversification Opportunities for Cisco Systems and Motorola Solutions
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cisco and Motorola is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and Motorola Solutions go up and down completely randomly.
Pair Corralation between Cisco Systems and Motorola Solutions
Assuming the 90 days trading horizon Cisco Systems is expected to generate 1.34 times less return on investment than Motorola Solutions. But when comparing it to its historical volatility, Cisco Systems is 1.63 times less risky than Motorola Solutions. It trades about 0.4 of its potential returns per unit of risk. Motorola Solutions is currently generating about 0.33 of returns per unit of risk over similar time horizon. 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cisco Systems vs. Motorola Solutions
Performance |
| Timeline |
| Cisco Systems |
| Motorola Solutions |
Cisco Systems and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cisco Systems and Motorola Solutions
The main advantage of trading using opposite Cisco Systems and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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.| Cisco Systems vs. Fevertree Drinks PLC | Cisco Systems vs. SPORTING | Cisco Systems vs. BII Railway Transportation | Cisco Systems vs. China Resources Beer |
| Motorola Solutions vs. Chesapeake Utilities | Motorola Solutions vs. Fukuyama Transporting Co | Motorola Solutions vs. GungHo Online Entertainment | Motorola Solutions vs. BII Railway Transportation |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |