Correlation Between Mesa Air and Nextera Energy

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

Diversification Opportunities for Mesa Air and Nextera Energy

-0.05

Correlation Coefficient

Mesa Air  Nextera Energy

Good diversification

The 3 months correlation between Mesa and Nextera is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Nextera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextera Energy 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 Nextera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextera Energy has no effect on the direction of Mesa Air i.e., Mesa Air and Nextera Energy go up and down completely randomly.

Pair Corralation between Mesa Air and Nextera Energy

Given the investment horizon of 90 days Mesa Air Group is expected to generate 4.26 times more return on investment than Nextera Energy. However, Mesa Air is 4.26 times more volatile than Nextera Energy. It trades about 0.05 of its potential returns per unit of risk. Nextera Energy is currently generating about 0.07 per unit of risk. If you would invest  87.00  in Mesa Air Group on October 5, 2024 and sell it today you would earn a total of  39.00  from holding Mesa Air Group or generate 44.83% return on investment over 90 days.

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

Mesa Air Group  vs.  Nextera Energy

Mesa Air Group

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Air may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Nextera Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Mesa Air and Nextera Energy

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

The idea behind Mesa Air Group and Nextera Energy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.