Correlation Between Mesa Air and ESH Acquisition

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

Diversification Opportunities for Mesa Air and ESH Acquisition

-0.54

Correlation Coefficient

Mesa Air  ESH Acquisition

Excellent diversification

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

Pair Corralation between Mesa Air and ESH Acquisition

Given the investment horizon of 90 days Mesa Air Group is expected to generate 11.9 times more return on investment than ESH Acquisition. However, Mesa Air is 11.9 times more volatile than ESH Acquisition Corp. It trades about 0.25 of its potential returns per unit of risk. ESH Acquisition Corp is currently generating about 0.14 per unit of risk. If you would invest  88.00  in Mesa Air Group on September 15, 2024 and sell it today you would earn a total of  19.00  from holding Mesa Air Group or generate 21.59% return on investment over 90 days.

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

Mesa Air Group  vs.  ESH Acquisition Corp

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 abnormal 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.

ESH Acquisition Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESH Acquisition Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, ESH Acquisition is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and ESH Acquisition

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

The idea behind Mesa Air Group and ESH Acquisition Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.