Correlation Between Hon Hai and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both Hon Hai 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 Hon Hai and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hon Hai Precision and Motorola Solutions, you can compare the effects of market volatilities on Hon Hai 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 Hon Hai with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hon Hai and Motorola Solutions.
Diversification Opportunities for Hon Hai and Motorola Solutions
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hon and Motorola is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hon Hai Precision and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and Hon Hai 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 Hon Hai Precision 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 Hon Hai i.e., Hon Hai and Motorola Solutions go up and down completely randomly.
Pair Corralation between Hon Hai and Motorola Solutions
Assuming the 90 days horizon Hon Hai Precision is expected to under-perform the Motorola Solutions. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hon Hai Precision is 1.11 times less risky than Motorola Solutions. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Motorola Solutions is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 45,300 in Motorola Solutions on August 31, 2024 and sell it today you would earn a total of 4,766 from holding Motorola Solutions or generate 10.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hon Hai Precision vs. Motorola Solutions
Performance |
| Timeline |
| Hon Hai Precision |
| Motorola Solutions |
Hon Hai and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hon Hai and Motorola Solutions
The main advantage of trading using opposite Hon Hai and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hon Hai 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.| Hon Hai vs. LightPath Technologies | Hon Hai vs. Methode Electronics | Hon Hai vs. OSI Systems | Hon Hai vs. Plexus Corp |
| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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