Correlation Between Mesa Air and Steven Madden

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

Diversification Opportunities for Mesa Air and Steven Madden

0.39

Correlation Coefficient

Mesa Air  Steven Madden

Weak diversification

The 3 months correlation between Mesa and Steven is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Mesa Air i.e., Mesa Air and Steven Madden go up and down completely randomly.

Pair Corralation between Mesa Air and Steven Madden

Given the investment horizon of 90 days Mesa Air Group is expected to under-perform the Steven Madden. In addition to that, Mesa Air is 2.49 times more volatile than Steven Madden. It trades about -0.03 of its total potential returns per unit of risk. Steven Madden is currently generating about 0.03 per unit of volatility. If you would invest  4,431  in Steven Madden on September 1, 2024 and sell it today you would earn a total of  127.00  from holding Steven Madden or generate 2.87% return on investment over 90 days.

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

Mesa Air Group  vs.  Steven Madden

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Steven Madden

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steven Madden are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and Steven Madden

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

The idea behind Mesa Air Group and Steven Madden 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 Valuation module to check real value of public entities based on technical and fundamental data.