Correlation Between Old Dominion and Verra Mobility

Can any of the company-specific risk be diversified away by investing in both Old Dominion 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 Old Dominion and Verra Mobility into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Old Dominion Freight and Verra Mobility Corp, you can compare the effects of market volatilities on Old Dominion 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 Old Dominion with a short position of Verra Mobility. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Dominion and Verra Mobility.

Diversification Opportunities for Old Dominion and Verra Mobility

-0.81

Correlation Coefficient

Old Dominion  Verra Mobility

Pay attention - limited upside

The 3 months correlation between Old and Verra is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Old Dominion Freight 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 Old Dominion 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 Old Dominion Freight 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 Old Dominion i.e., Old Dominion and Verra Mobility go up and down completely randomly.

Pair Corralation between Old Dominion and Verra Mobility

Given the investment horizon of 90 days Old Dominion Freight is expected to under-perform the Verra Mobility. In addition to that, Old Dominion is 1.44 times more volatile than Verra Mobility Corp. It trades about -0.32 of its total potential returns per unit of risk. Verra Mobility Corp is currently generating about 0.06 per unit of volatility. If you would invest  2,320  in Verra Mobility Corp on September 12, 2024 and sell it today you would earn a total of  34.00  from holding Verra Mobility Corp or generate 1.47% return on investment over 90 days.

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

Old Dominion Freight  vs.  Verra Mobility Corp

Old Dominion Freight

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Old Dominion Freight are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Old Dominion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Old Dominion and Verra Mobility

The main advantage of trading using opposite Old Dominion and Verra Mobility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Dominion 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 Old Dominion Freight 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.