Correlation Between Mesa Air and Himalaya Shipping

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

Diversification Opportunities for Mesa Air and Himalaya Shipping

0.62

Correlation Coefficient

Mesa Air  Himalaya Shipping

Poor diversification

The 3 months correlation between Mesa and Himalaya is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Himalaya Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Himalaya Shipping 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 Himalaya Shipping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Himalaya Shipping has no effect on the direction of Mesa Air i.e., Mesa Air and Himalaya Shipping go up and down completely randomly.

Pair Corralation between Mesa Air and Himalaya Shipping

Given the investment horizon of 90 days Mesa Air Group is expected to generate 1.84 times more return on investment than Himalaya Shipping. However, Mesa Air is 1.84 times more volatile than Himalaya Shipping. It trades about -0.03 of its potential returns per unit of risk. Himalaya Shipping is currently generating about -0.08 per unit of risk. If you would invest  124.00  in Mesa Air Group on September 3, 2024 and sell it today you would lose (16.00) from holding Mesa Air Group or give up 12.9% of portfolio value over 90 days.

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

Mesa Air Group  vs.  Himalaya Shipping

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.

Himalaya Shipping

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Himalaya Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Mesa Air and Himalaya Shipping

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

The idea behind Mesa Air Group and Himalaya Shipping 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.