Correlation Between Jiangsu Expressway and Verra Mobility

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

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

Diversification Opportunities for Jiangsu Expressway and Verra Mobility

0.1

Correlation Coefficient

Jiangsu Expressway  Verra Mobility

Average diversification

The 3 months correlation between Jiangsu and Verra is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Jiangsu Expressway Co 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 Jiangsu Expressway 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 Jiangsu Expressway Co 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 Jiangsu Expressway i.e., Jiangsu Expressway and Verra Mobility go up and down completely randomly.

Pair Corralation between Jiangsu Expressway and Verra Mobility

Assuming the 90 days horizon Jiangsu Expressway Co is expected to under-perform the Verra Mobility. In addition to that, Jiangsu Expressway is 3.96 times more volatile than Verra Mobility Corp. It trades about -0.02 of its total potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.56 per unit of volatility. If you would invest  2,391  in Verra Mobility Corp on October 25, 2024 and sell it today you would earn a total of  199.00  from holding Verra Mobility Corp or generate 8.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Jiangsu Expressway Co  vs.  Verra Mobility Corp

Jiangsu Expressway

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Jiangsu Expressway Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Jiangsu Expressway is not utilizing all of its potentials. The current 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 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 Jiangsu Expressway and Verra Mobility

The main advantage of trading using opposite Jiangsu Expressway and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jiangsu Expressway 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 Jiangsu Expressway Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.