Correlation Between VHAI and Verra Mobility

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

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

Diversification Opportunities for VHAI and Verra Mobility

-0.27

Correlation Coefficient

VHAI  Verra Mobility

Very good diversification

The 3 months correlation between VHAI and Verra is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding VHAI 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 VHAI 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 VHAI 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 VHAI i.e., VHAI and Verra Mobility go up and down completely randomly.

Pair Corralation between VHAI and Verra Mobility

Given the investment horizon of 90 days VHAI is expected to under-perform the Verra Mobility. In addition to that, VHAI is 7.58 times more volatile than Verra Mobility Corp. It trades about -0.17 of its total potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.08 per unit of volatility. If you would invest  1,346  in Verra Mobility Corp on October 9, 2024 and sell it today you would earn a total of  1,107  from holding Verra Mobility Corp or generate 82.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	37.96%
Values	Daily Returns

VHAI  vs.  Verra Mobility Corp

VHAI

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak basic indicators, VHAI demonstrated 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 latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with VHAI and Verra Mobility

The main advantage of trading using opposite VHAI and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VHAI 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 VHAI 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.