Correlation Between Verra Mobility and Shenzhen Expressway
Can any of the company-specific risk be diversified away by investing in both Verra Mobility and Shenzhen Expressway 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 Shenzhen Expressway 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 Shenzhen Expressway, you can compare the effects of market volatilities on Verra Mobility and Shenzhen Expressway 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 Shenzhen Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verra Mobility and Shenzhen Expressway.
Diversification Opportunities for Verra Mobility and Shenzhen Expressway
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Verra and Shenzhen is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and Shenzhen Expressway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Expressway 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 Shenzhen Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Expressway has no effect on the direction of Verra Mobility i.e., Verra Mobility and Shenzhen Expressway go up and down completely randomly.
Pair Corralation between Verra Mobility and Shenzhen Expressway
Given the investment horizon of 90 days Verra Mobility Corp is expected to under-perform the Shenzhen Expressway. In addition to that, Verra Mobility is 1.6 times more volatile than Shenzhen Expressway. It trades about -0.04 of its total potential returns per unit of risk. Shenzhen Expressway is currently generating about 0.03 per unit of volatility. If you would invest 86.00 in Shenzhen Expressway on September 1, 2024 and sell it today you would earn a total of 3.00 from holding Shenzhen Expressway or generate 3.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verra Mobility Corp vs. Shenzhen Expressway
Performance |
| Timeline |
| Verra Mobility Corp |
| Shenzhen Expressway |
Verra Mobility and Shenzhen Expressway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verra Mobility and Shenzhen Expressway
The main advantage of trading using opposite Verra Mobility and Shenzhen Expressway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verra Mobility position performs unexpectedly, Shenzhen Expressway 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 Shenzhen Expressway will offset losses from the drop in Shenzhen Expressway's long position.The idea behind Verra Mobility Corp and Shenzhen Expressway 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.| Shenzhen Expressway vs. Verra Mobility Corp | Shenzhen Expressway vs. HUMANA INC | Shenzhen Expressway vs. SCOR PK | Shenzhen Expressway vs. Aquagold International |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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