Correlation Between Motorola Solutions and Deswell Industries

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

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

Diversification Opportunities for Motorola Solutions and Deswell Industries

-0.39

Correlation Coefficient

Motorola Solutions  Deswell Industries

Very good diversification

The 3 months correlation between Motorola and Deswell is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Deswell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deswell Industries 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 Deswell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deswell Industries has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Deswell Industries go up and down completely randomly.

Pair Corralation between Motorola Solutions and Deswell Industries

Considering the 90-day investment horizon Motorola Solutions is expected to under-perform the Deswell Industries. But the stock apears to be less risky and, when comparing its historical volatility, Motorola Solutions is 1.64 times less risky than Deswell Industries. The stock trades about -0.13 of its potential returns per unit of risk. The Deswell Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  222.00  in Deswell Industries on January 29, 2024 and sell it today you would earn a total of  8.00  from holding Deswell Industries or generate 3.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Motorola Solutions  vs.  Deswell Industries

Motorola Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Motorola Solutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Deswell Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deswell Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Motorola Solutions and Deswell Industries

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

The idea behind Motorola Solutions and Deswell Industries 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.