Correlation Between Mesa Air and ServiceNow

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

Diversification Opportunities for Mesa Air and ServiceNow

-0.11

Correlation Coefficient

Mesa Air  ServiceNow

Good diversification

The 3 months correlation between Mesa and ServiceNow is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow 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 ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of Mesa Air i.e., Mesa Air and ServiceNow go up and down completely randomly.

Pair Corralation between Mesa Air and ServiceNow

Given the investment horizon of 90 days Mesa Air Group is expected to generate 2.06 times more return on investment than ServiceNow. However, Mesa Air is 2.06 times more volatile than ServiceNow. It trades about 0.14 of its potential returns per unit of risk. ServiceNow is currently generating about 0.08 per unit of risk. If you would invest  102.00  in Mesa Air Group on September 27, 2024 and sell it today you would earn a total of  12.00  from holding Mesa Air Group or generate 11.76% 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.  ServiceNow

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 somewhat strong basic indicators, Mesa Air is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

ServiceNow

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesa Air and ServiceNow

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

The idea behind Mesa Air Group and ServiceNow 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.