Correlation Between NETGEAR and Verra Mobility

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

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

Diversification Opportunities for NETGEAR and Verra Mobility

-0.59

Correlation Coefficient

NETGEAR  Verra Mobility

Excellent diversification

The 3 months correlation between NETGEAR and Verra is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR 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 NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Verra Mobility go up and down completely randomly.

Pair Corralation between NETGEAR and Verra Mobility

Given the investment horizon of 90 days NETGEAR is expected to generate 1.08 times less return on investment than Verra Mobility. In addition to that, NETGEAR is 1.85 times more volatile than Verra Mobility Corp. It trades about 0.04 of its total potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.07 per unit of volatility. If you would invest  1,511  in Verra Mobility Corp on October 20, 2024 and sell it today you would earn a total of  1,037  from holding Verra Mobility Corp or generate 68.63% return on investment over 90 days.

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

NETGEAR  vs.  Verra Mobility Corp

NETGEAR

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

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 NETGEAR and Verra Mobility

The main advantage of trading using opposite NETGEAR and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.