Correlation Between Mesa Air and Entergy Louisiana

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

Diversification Opportunities for Mesa Air and Entergy Louisiana

0.54

Correlation Coefficient

Mesa Air  Entergy Louisiana

Very weak diversification

The 3 months correlation between Mesa and Entergy is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Entergy Louisiana LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Louisiana LLC 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 Entergy Louisiana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Louisiana LLC has no effect on the direction of Mesa Air i.e., Mesa Air and Entergy Louisiana go up and down completely randomly.

Pair Corralation between Mesa Air and Entergy Louisiana

Given the investment horizon of 90 days Mesa Air Group is expected to generate 7.74 times more return on investment than Entergy Louisiana. However, Mesa Air is 7.74 times more volatile than Entergy Louisiana LLC. It trades about 0.02 of its potential returns per unit of risk. Entergy Louisiana LLC is currently generating about 0.04 per unit of risk. If you would invest  126.00  in Mesa Air Group on September 4, 2024 and sell it today you would lose (23.00) from holding Mesa Air Group or give up 18.25% of portfolio value over 90 days.

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

Mesa Air Group  vs.  Entergy Louisiana LLC

Mesa Air Group

Risk-Adjusted Performance

0 of 100

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Entergy Louisiana LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy Louisiana LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Entergy Louisiana is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Mesa Air and Entergy Louisiana

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

The idea behind Mesa Air Group and Entergy Louisiana LLC 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.