Correlation Between GM and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Motorola Solutions, you can compare the effects of market volatilities on GM 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 GM with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Motorola Solutions.
Diversification Opportunities for GM and Motorola Solutions
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GM and Motorola is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and GM 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 General Motors 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 GM i.e., GM and Motorola Solutions go up and down completely randomly.
Pair Corralation between GM and Motorola Solutions
Allowing for the 90-day total investment horizon GM is expected to generate 1.53 times less return on investment than Motorola Solutions. In addition to that, GM is 1.68 times more volatile than Motorola Solutions. It trades about 0.08 of its total potential returns per unit of risk. Motorola Solutions is currently generating about 0.2 per unit of volatility. If you would invest 32,358 in Motorola Solutions on September 3, 2024 and sell it today you would earn a total of 15,142 from holding Motorola Solutions or generate 46.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.69% |
| Values | Daily Returns |
General Motors vs. Motorola Solutions
Performance |
| Timeline |
| General Motors |
| Motorola Solutions |
GM and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Motorola Solutions
The main advantage of trading using opposite GM and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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. Mobilezone Holding AG | Motorola Solutions vs. DICKS Sporting Goods | Motorola Solutions vs. Fukuyama Transporting Co | Motorola Solutions vs. PARKEN Sport Entertainment |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |