Correlation Between Mesa Air and Bowhead Specialty

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

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

Diversification Opportunities for Mesa Air and Bowhead Specialty

-0.69

Correlation Coefficient

Mesa Air  Bowhead Specialty

Excellent diversification

The 3 months correlation between Mesa and Bowhead is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Bowhead Specialty Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bowhead Specialty and Mesa Air 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 Mesa Air Group are associated (or correlated) with Bowhead Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bowhead Specialty has no effect on the direction of Mesa Air i.e., Mesa Air and Bowhead Specialty go up and down completely randomly.

Pair Corralation between Mesa Air and Bowhead Specialty

Given the investment horizon of 90 days Mesa Air Group is expected to under-perform the Bowhead Specialty. In addition to that, Mesa Air is 1.84 times more volatile than Bowhead Specialty Holdings. It trades about -0.16 of its total potential returns per unit of risk. Bowhead Specialty Holdings is currently generating about 0.14 per unit of volatility. If you would invest  3,448  in Bowhead Specialty Holdings on December 27, 2024 and sell it today you would earn a total of  588.00  from holding Bowhead Specialty Holdings or generate 17.05% return on investment over 90 days.

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

Mesa Air Group  vs.  Bowhead Specialty Holdings

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.

Bowhead Specialty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bowhead Specialty Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Bowhead Specialty showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesa Air and Bowhead Specialty

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

The idea behind Mesa Air Group and Bowhead Specialty Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.