Correlation Between Mesa Air and Northstar Clean

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

Diversification Opportunities for Mesa Air and Northstar Clean

0.14

Correlation Coefficient

Mesa Air  Northstar Clean

Average diversification

The 3 months correlation between Mesa and Northstar is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Northstar Clean Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northstar Clean Tech 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 Northstar Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northstar Clean Tech has no effect on the direction of Mesa Air i.e., Mesa Air and Northstar Clean go up and down completely randomly.

Pair Corralation between Mesa Air and Northstar Clean

Given the investment horizon of 90 days Mesa Air is expected to generate 10.97 times less return on investment than Northstar Clean. In addition to that, Mesa Air is 1.16 times more volatile than Northstar Clean Technologies. It trades about 0.0 of its total potential returns per unit of risk. Northstar Clean Technologies is currently generating about 0.06 per unit of volatility. If you would invest  11.00  in Northstar Clean Technologies on October 3, 2024 and sell it today you would earn a total of  17.00  from holding Northstar Clean Technologies or generate 154.55% return on investment over 90 days.

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

Mesa Air Group  vs.  Northstar Clean Technologies

Mesa Air Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 1 (%) 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.

Northstar Clean Tech

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Northstar Clean Technologies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Northstar Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesa Air and Northstar Clean

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

The idea behind Mesa Air Group and Northstar Clean Technologies 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.