Correlation Between Verra Mobility and Carsales

Can any of the company-specific risk be diversified away by investing in both Verra Mobility and Carsales 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 Carsales 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 CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Verra Mobility and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verra Mobility and Carsales.

Diversification Opportunities for Verra Mobility and Carsales

-0.22

Correlation Coefficient

Verra Mobility  Carsales

Very good diversification

The 3 months correlation between Verra and Carsales is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Verra Mobility i.e., Verra Mobility and Carsales go up and down completely randomly.

Pair Corralation between Verra Mobility and Carsales

Given the investment horizon of 90 days Verra Mobility Corp is expected to under-perform the Carsales. But the stock apears to be less risky and, when comparing its historical volatility, Verra Mobility Corp is 1.57 times less risky than Carsales. The stock trades about -0.11 of its potential returns per unit of risk. The CarsalesCom Ltd ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,985  in CarsalesCom Ltd ADR on October 5, 2024 and sell it today you would lose (435.00) from holding CarsalesCom Ltd ADR or give up 8.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Verra Mobility Corp  vs.  CarsalesCom Ltd ADR

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 inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CarsalesCom ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarsalesCom Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Verra Mobility and Carsales

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

The idea behind Verra Mobility Corp and CarsalesCom Ltd ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.