Correlation Between Verra Mobility and Acme United

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

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

Diversification Opportunities for Verra Mobility and Acme United

-0.04

Correlation Coefficient

Verra Mobility  Acme United

Good diversification

The 3 months correlation between Verra and Acme is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and Acme United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acme United and Verra Mobility 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 Verra Mobility Corp are associated (or correlated) with Acme United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acme United has no effect on the direction of Verra Mobility i.e., Verra Mobility and Acme United go up and down completely randomly.

Pair Corralation between Verra Mobility and Acme United

Given the investment horizon of 90 days Verra Mobility is expected to generate 1.86 times less return on investment than Acme United. But when comparing it to its historical volatility, Verra Mobility Corp is 1.93 times less risky than Acme United. It trades about 0.05 of its potential returns per unit of risk. Acme United is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,442  in Acme United on October 24, 2024 and sell it today you would earn a total of  1,308  from holding Acme United or generate 53.56% return on investment over 90 days.

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

Verra Mobility Corp  vs.  Acme United

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.

Acme United

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Verra Mobility and Acme United

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

The idea behind Verra Mobility Corp and Acme United 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.