Correlation Between Verra Mobility and Norfolk Southern

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

Diversification Opportunities for Verra Mobility and Norfolk Southern

-0.3

Correlation Coefficient

Verra Mobility  Norfolk Southern

Very good diversification

The 3 months correlation between Verra and Norfolk is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of Verra Mobility i.e., Verra Mobility and Norfolk Southern go up and down completely randomly.

Pair Corralation between Verra Mobility and Norfolk Southern

Given the investment horizon of 90 days Verra Mobility Corp is expected to generate 0.92 times more return on investment than Norfolk Southern. However, Verra Mobility Corp is 1.09 times less risky than Norfolk Southern. It trades about 0.11 of its potential returns per unit of risk. Norfolk Southern is currently generating about -0.27 per unit of risk. If you would invest  2,344  in Verra Mobility Corp on October 9, 2024 and sell it today you would earn a total of  109.00  from holding Verra Mobility Corp or generate 4.65% 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.  Norfolk Southern

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.

Norfolk Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norfolk Southern has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Norfolk Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Verra Mobility and Norfolk Southern

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

The idea behind Verra Mobility Corp and Norfolk Southern 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.