Correlation Between Motorola Solutions and Lumentum Holdings

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

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

Diversification Opportunities for Motorola Solutions and Lumentum Holdings

0.47

Correlation Coefficient

Motorola Solutions  Lumentum Holdings

Very weak diversification

The 3 months correlation between Motorola and Lumentum is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Lumentum Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumentum Holdings 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 Lumentum Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumentum Holdings has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Lumentum Holdings go up and down completely randomly.

Pair Corralation between Motorola Solutions and Lumentum Holdings

Considering the 90-day investment horizon Motorola Solutions is expected to generate 8.57 times less return on investment than Lumentum Holdings. But when comparing it to its historical volatility, Motorola Solutions is 3.02 times less risky than Lumentum Holdings. It trades about 0.12 of its potential returns per unit of risk. Lumentum Holdings is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  6,624  in Lumentum Holdings on May 7, 2025 and sell it today you would earn a total of  4,489  from holding Lumentum Holdings or generate 67.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Motorola Solutions  vs.  Lumentum Holdings

Motorola Solutions

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 9 (%) 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 September 2025.

Lumentum Holdings

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Lumentum Holdings are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Lumentum Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Motorola Solutions and Lumentum Holdings

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

The idea behind Motorola Solutions and Lumentum Holdings 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.