Correlation Between Mesa Air and BrightSpring Health

Can any of the company-specific risk be diversified away by investing in both Mesa Air and BrightSpring Health 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 BrightSpring Health 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 BrightSpring Health Services,, you can compare the effects of market volatilities on Mesa Air and BrightSpring Health 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 BrightSpring Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and BrightSpring Health.

Diversification Opportunities for Mesa Air and BrightSpring Health

0.2

Correlation Coefficient

Mesa Air  BrightSpring Health

Modest diversification

The 3 months correlation between Mesa and BrightSpring is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health 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 BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of Mesa Air i.e., Mesa Air and BrightSpring Health go up and down completely randomly.

Pair Corralation between Mesa Air and BrightSpring Health

Given the investment horizon of 90 days Mesa Air Group is expected to generate 1.7 times more return on investment than BrightSpring Health. However, Mesa Air is 1.7 times more volatile than BrightSpring Health Services,. It trades about 0.06 of its potential returns per unit of risk. BrightSpring Health Services, is currently generating about 0.0 per unit of risk. If you would invest  102.00  in Mesa Air Group on December 3, 2024 and sell it today you would earn a total of  12.00  from holding Mesa Air Group or generate 11.76% return on investment over 90 days.

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

Mesa Air Group  vs.  BrightSpring Health Services,

Mesa Air Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Air sustained solid returns over the last few months and may actually be approaching a breakup point.

BrightSpring Health

Risk-Adjusted Performance

Weak

Over the last 90 days BrightSpring Health Services, has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BrightSpring Health is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mesa Air and BrightSpring Health

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

The idea behind Mesa Air Group and BrightSpring Health Services, 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.