Correlation Between JD Sports and Verra Mobility

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

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

Diversification Opportunities for JD Sports and Verra Mobility

0.22

Correlation Coefficient

JD Sports  Verra Mobility

Modest diversification

The 3 months correlation between JDDSF and Verra is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding JD Sports Fashion 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 JD Sports 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 JD Sports Fashion 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 JD Sports i.e., JD Sports and Verra Mobility go up and down completely randomly.

Pair Corralation between JD Sports and Verra Mobility

Assuming the 90 days horizon JD Sports Fashion is expected to under-perform the Verra Mobility. In addition to that, JD Sports is 8.29 times more volatile than Verra Mobility Corp. It trades about -0.22 of its total potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.7 per unit of volatility. If you would invest  2,364  in Verra Mobility Corp on October 20, 2024 and sell it today you would earn a total of  184.00  from holding Verra Mobility Corp or generate 7.78% return on investment over 90 days.

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

JD Sports Fashion  vs.  Verra Mobility Corp

JD Sports Fashion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 very healthy basic indicators, Verra Mobility is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with JD Sports and Verra Mobility

The main advantage of trading using opposite JD Sports and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JD Sports 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 JD Sports Fashion 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.