Correlation Between KLA Tencor and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both KLA Tencor 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 KLA Tencor and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KLA Tencor and Motorola Solutions, you can compare the effects of market volatilities on KLA Tencor 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 KLA Tencor with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of KLA Tencor and Motorola Solutions.
Diversification Opportunities for KLA Tencor and Motorola Solutions
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KLA and Motorola is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and KLA Tencor 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 KLA Tencor 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 KLA Tencor i.e., KLA Tencor and Motorola Solutions go up and down completely randomly.
Pair Corralation between KLA Tencor and Motorola Solutions
Given the investment horizon of 90 days KLA Tencor is expected to under-perform the Motorola Solutions. In addition to that, KLA Tencor is 1.08 times more volatile than Motorola Solutions. It trades about -0.09 of its total potential returns per unit of risk. Motorola Solutions is currently generating about 0.17 per unit of volatility. If you would invest 45,739 in Motorola Solutions on August 27, 2024 and sell it today you would earn a total of 3,098 from holding Motorola Solutions or generate 6.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KLA Tencor vs. Motorola Solutions
Performance |
| Timeline |
| KLA Tencor |
| Motorola Solutions |
KLA Tencor and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KLA Tencor and Motorola Solutions
The main advantage of trading using opposite KLA Tencor and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor 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 KLA Tencor 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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