Correlation Between Mesa Air and Old Dominion

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

Diversification Opportunities for Mesa Air and Old Dominion

-0.73

Correlation Coefficient

Mesa Air  Old Dominion

Pay attention - limited upside

The 3 months correlation between Mesa and Old is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Old Dominion Freight in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Dominion Freight 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 Old Dominion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Dominion Freight has no effect on the direction of Mesa Air i.e., Mesa Air and Old Dominion go up and down completely randomly.

Pair Corralation between Mesa Air and Old Dominion

Given the investment horizon of 90 days Mesa Air Group is expected to generate 2.04 times more return on investment than Old Dominion. However, Mesa Air is 2.04 times more volatile than Old Dominion Freight. It trades about 0.04 of its potential returns per unit of risk. Old Dominion Freight is currently generating about -0.17 per unit of risk. If you would invest  108.00  in Mesa Air Group on November 28, 2024 and sell it today you would earn a total of  5.00  from holding Mesa Air Group or generate 4.63% return on investment over 90 days.

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

Mesa Air Group  vs.  Old Dominion Freight

Mesa Air Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 3 (%) 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 March 2025.

Old Dominion Freight

Risk-Adjusted Performance

Very Weak

Over the last 90 days Old Dominion Freight has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Mesa Air and Old Dominion

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

The idea behind Mesa Air Group and Old Dominion Freight 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.