Correlation Between NLIGHT and Verra Mobility
Can any of the company-specific risk be diversified away by investing in both NLIGHT and Verra Mobility 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 NLIGHT and Verra Mobility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nLIGHT Inc and Verra Mobility Corp, you can compare the effects of market volatilities on NLIGHT and Verra Mobility 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 NLIGHT with a short position of Verra Mobility. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and Verra Mobility.
Diversification Opportunities for NLIGHT and Verra Mobility
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NLIGHT and Verra is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and Verra Mobility Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verra Mobility Corp and NLIGHT 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 nLIGHT Inc are associated (or correlated) with Verra Mobility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verra Mobility Corp has no effect on the direction of NLIGHT i.e., NLIGHT and Verra Mobility go up and down completely randomly.
Pair Corralation between NLIGHT and Verra Mobility
Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the Verra Mobility. In addition to that, NLIGHT is 3.68 times more volatile than Verra Mobility Corp. It trades about -0.03 of its total potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.38 per unit of volatility. If you would invest 2,453 in Verra Mobility Corp on November 6, 2024 and sell it today you would earn a total of 186.00 from holding Verra Mobility Corp or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
nLIGHT Inc vs. Verra Mobility Corp
Performance |
| Timeline |
| nLIGHT Inc |
| Verra Mobility Corp |
NLIGHT and Verra Mobility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NLIGHT and Verra Mobility
The main advantage of trading using opposite NLIGHT and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT position performs unexpectedly, Verra Mobility 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 Verra Mobility will offset losses from the drop in Verra Mobility's long position.The idea behind nLIGHT Inc and Verra Mobility Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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