Correlation Between Verra Mobility and Nextracker

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

Diversification Opportunities for Verra Mobility and Nextracker

-0.54

Correlation Coefficient

Verra Mobility  Nextracker

Excellent diversification

The 3 months correlation between Verra and Nextracker is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and Nextracker Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextracker Class A 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 Nextracker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextracker Class A has no effect on the direction of Verra Mobility i.e., Verra Mobility and Nextracker go up and down completely randomly.

Pair Corralation between Verra Mobility and Nextracker

Given the investment horizon of 90 days Verra Mobility Corp is expected to under-perform the Nextracker. But the stock apears to be less risky and, when comparing its historical volatility, Verra Mobility Corp is 2.2 times less risky than Nextracker. The stock trades about -0.08 of its potential returns per unit of risk. The Nextracker Class A is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,684  in Nextracker Class A on September 18, 2024 and sell it today you would lose (143.00) from holding Nextracker Class A or give up 3.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Verra Mobility Corp  vs.  Nextracker Class A

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.

Nextracker Class A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextracker Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Nextracker is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Verra Mobility and Nextracker

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

The idea behind Verra Mobility Corp and Nextracker Class A 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.