Correlation Between Verra Mobility and United Guardian

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

Diversification Opportunities for Verra Mobility and United Guardian

0.88

Correlation Coefficient

Verra Mobility  United Guardian

Very poor diversification

The 3 months correlation between Verra and United is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Verra Mobility i.e., Verra Mobility and United Guardian go up and down completely randomly.

Pair Corralation between Verra Mobility and United Guardian

Given the investment horizon of 90 days Verra Mobility is expected to generate 6.56 times less return on investment than United Guardian. But when comparing it to its historical volatility, Verra Mobility Corp is 1.72 times less risky than United Guardian. It trades about 0.01 of its potential returns per unit of risk. United Guardian is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  711.00  in United Guardian on September 20, 2024 and sell it today you would earn a total of  257.00  from holding United Guardian or generate 36.15% return on investment over 90 days.

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

Verra Mobility Corp  vs.  United Guardian

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Verra Mobility and United Guardian

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

The idea behind Verra Mobility Corp and United Guardian 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.