Correlation Between Innovative Industrial and Verra Mobility

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

By analyzing existing cross correlation between Innovative Industrial Properties and Verra Mobility Corp, you can compare the effects of market volatilities on Innovative Industrial and Verra Mobility 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 Innovative Industrial with a short position of Verra Mobility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovative Industrial and Verra Mobility.

Diversification Opportunities for Innovative Industrial and Verra Mobility

-0.19

Correlation Coefficient

Innovative Industrial  Verra Mobility

Good diversification

The 3 months correlation between Innovative and Verra is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Innovative Industrial Properti and Verra Mobility Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verra Mobility Corp and Innovative Industrial 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 Innovative Industrial Properties are associated (or correlated) with Verra Mobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verra Mobility Corp has no effect on the direction of Innovative Industrial i.e., Innovative Industrial and Verra Mobility go up and down completely randomly.

Pair Corralation between Innovative Industrial and Verra Mobility

Assuming the 90 days trading horizon Innovative Industrial Properties is expected to generate 0.38 times more return on investment than Verra Mobility. However, Innovative Industrial Properties is 2.66 times less risky than Verra Mobility. It trades about -0.1 of its potential returns per unit of risk. Verra Mobility Corp is currently generating about -0.12 per unit of risk. If you would invest  2,640  in Innovative Industrial Properties on September 23, 2024 and sell it today you would lose (124.00) from holding Innovative Industrial Properties or give up 4.7% of portfolio value over 90 days.

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

Innovative Industrial Properti  vs.  Verra Mobility Corp

Innovative Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovative Industrial Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Innovative Industrial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Verra Mobility Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verra Mobility Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Innovative Industrial and Verra Mobility

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

The idea behind Innovative Industrial Properties and Verra Mobility Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.