Correlation Between Nokia and Motorola Solutions
Can any of the company-specific risk be diversified away by investing in both Nokia 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 Nokia and Motorola Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nokia and Motorola Solutions, you can compare the effects of market volatilities on Nokia 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 Nokia with a short position of Motorola Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nokia and Motorola Solutions.
Diversification Opportunities for Nokia and Motorola Solutions
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nokia and Motorola is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nokia and Motorola Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorola Solutions and Nokia 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 Nokia 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 Nokia i.e., Nokia and Motorola Solutions go up and down completely randomly.
Pair Corralation between Nokia and Motorola Solutions
Assuming the 90 days trading horizon Nokia is expected to generate 1.2 times less return on investment than Motorola Solutions. In addition to that, Nokia is 1.48 times more volatile than Motorola Solutions. It trades about 0.04 of its total potential returns per unit of risk. Motorola Solutions is currently generating about 0.08 per unit of volatility. If you would invest 40,144 in Motorola Solutions on November 2, 2024 and sell it today you would earn a total of 4,346 from holding Motorola Solutions or generate 10.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.04% |
| Values | Daily Returns |
Nokia vs. Motorola Solutions
Performance |
| Timeline |
| Nokia |
| Motorola Solutions |
Nokia and Motorola Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nokia and Motorola Solutions
The main advantage of trading using opposite Nokia and Motorola Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nokia 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 Nokia 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. Luckin Coffee | Motorola Solutions vs. PennyMac Mortgage Investment | Motorola Solutions vs. Alliance Data Systems | Motorola Solutions vs. MICRONIC MYDATA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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