Correlation Between Air Transport and Mesa Air

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

By analyzing existing cross correlation between Air Transport Services and Mesa Air Group, you can compare the effects of market volatilities on Air Transport and Mesa Air 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 Air Transport with a short position of Mesa Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Mesa Air.

Diversification Opportunities for Air Transport and Mesa Air

-0.53

Correlation Coefficient

Air Transport  Mesa Air

Excellent diversification

The 3 months correlation between Air and Mesa is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Mesa Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Air Group and Air Transport 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 Air Transport Services are associated (or correlated) with Mesa Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Air Group has no effect on the direction of Air Transport i.e., Air Transport and Mesa Air go up and down completely randomly.

Pair Corralation between Air Transport and Mesa Air

Given the investment horizon of 90 days Air Transport Services is expected to generate 0.03 times more return on investment than Mesa Air. However, Air Transport Services is 30.66 times less risky than Mesa Air. It trades about 0.25 of its potential returns per unit of risk. Mesa Air Group is currently generating about -0.16 per unit of risk. If you would invest  2,192  in Air Transport Services on December 27, 2024 and sell it today you would earn a total of  42.00  from holding Air Transport Services or generate 1.92% return on investment over 90 days.

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

Air Transport Services  vs.  Mesa Air Group

Air Transport Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mesa Air Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mesa Air Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Air Transport and Mesa Air

The main advantage of trading using opposite Air Transport and Mesa Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport position performs unexpectedly, Mesa Air 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 Mesa Air will offset losses from the drop in Mesa Air's long position.

The idea behind Air Transport Services and Mesa Air Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.