Correlation Between Motorola Solutions and Ambarella

Can any of the company-specific risk be diversified away by investing in both Motorola Solutions and Ambarella 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 Motorola Solutions and Ambarella into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Motorola Solutions and Ambarella, you can compare the effects of market volatilities on Motorola Solutions and Ambarella 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 Motorola Solutions with a short position of Ambarella. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorola Solutions and Ambarella.

Diversification Opportunities for Motorola Solutions and Ambarella

-0.38

Correlation Coefficient

Motorola Solutions  Ambarella

Very good diversification

The 3 months correlation between Motorola and Ambarella is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Ambarella in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambarella and Motorola Solutions 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 Motorola Solutions are associated (or correlated) with Ambarella. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambarella has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Ambarella go up and down completely randomly.

Pair Corralation between Motorola Solutions and Ambarella

Considering the 90-day investment horizon Motorola Solutions is expected to generate 0.5 times more return on investment than Ambarella. However, Motorola Solutions is 2.01 times less risky than Ambarella. It trades about 0.14 of its potential returns per unit of risk. Ambarella is currently generating about -0.09 per unit of risk. If you would invest  33,031  in Motorola Solutions on February 28, 2024 and sell it today you would earn a total of  3,347  from holding Motorola Solutions or generate 10.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Motorola Solutions  vs.  Ambarella

Motorola Solutions

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Motorola Solutions may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Ambarella

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambarella has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Motorola Solutions and Ambarella

The main advantage of trading using opposite Motorola Solutions and Ambarella positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorola Solutions position performs unexpectedly, Ambarella 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 Ambarella will offset losses from the drop in Ambarella's long position.

The idea behind Motorola Solutions and Ambarella 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.