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

0.73

Correlation Coefficient

Verra Mobility  United Guardian

Poor diversification

The 3 months correlation between Verra and United is 0.73. 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 Corp is expected to under-perform the United Guardian. In addition to that, Verra Mobility is 1.06 times more volatile than United Guardian. It trades about -0.2 of its total potential returns per unit of risk. United Guardian is currently generating about 0.0 per unit of volatility. If you would invest  979.00  in United Guardian on December 11, 2024 and sell it today you would lose (5.00) from holding United Guardian or give up 0.51% of portfolio value over 90 days.

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

Verra Mobility Corp  vs.  United Guardian

Verra Mobility Corp

Risk-Adjusted Performance

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

United Guardian

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Guardian are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Guardian is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.