Correlation Between Verra Mobility and JD Sports

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

Diversification Opportunities for Verra Mobility and JD Sports

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Verra and JDDSF is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Verra Mobility i.e., Verra Mobility and JD Sports go up and down completely randomly.

Pair Corralation between Verra Mobility and JD Sports

Given the investment horizon of 90 days Verra Mobility Corp is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, Verra Mobility Corp is 1.09 times less risky than JD Sports. The stock trades about -0.05 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  164.00  in JD Sports Fashion on September 24, 2024 and sell it today you would lose (18.00) from holding JD Sports Fashion or give up 10.98% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.21%
ValuesDaily Returns

Verra Mobility Corp  vs.  JD Sports Fashion

 Performance 
       Timeline  
Verra Mobility Corp 

Risk-Adjusted Performance

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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.
JD Sports Fashion 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JD Sports is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Verra Mobility and JD Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Verra Mobility and JD Sports

The main advantage of trading using opposite Verra Mobility and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verra Mobility position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.
The idea behind Verra Mobility Corp and JD Sports Fashion 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 CEOs Directory module to screen CEOs from public companies around the world.

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