Correlation Between Mesa Air and LATAM Airlines

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

Diversification Opportunities for Mesa Air and LATAM Airlines

0.0

Correlation Coefficient

Mesa Air  LATAM Airlines

Pay attention - limited upside

The 3 months correlation between Mesa and LATAM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and LATAM Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LATAM Airlines Group 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 LATAM Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LATAM Airlines Group has no effect on the direction of Mesa Air i.e., Mesa Air and LATAM Airlines go up and down completely randomly.

Pair Corralation between Mesa Air and LATAM Airlines

If you would invest (100.00) in LATAM Airlines Group on December 28, 2024 and sell it today you would earn a total of  100.00  from holding LATAM Airlines Group or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Mesa Air Group  vs.  LATAM Airlines Group

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.

LATAM Airlines Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days LATAM Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, LATAM Airlines is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and LATAM Airlines

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

The idea behind Mesa Air Group and LATAM Airlines Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.