Correlation Between Mesa Air and Solstad Offshore

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

Diversification Opportunities for Mesa Air and Solstad Offshore

0.0

Correlation Coefficient

Mesa Air  Solstad Offshore

Pay attention - limited upside

The 3 months correlation between Mesa and Solstad is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of Mesa Air i.e., Mesa Air and Solstad Offshore go up and down completely randomly.

Pair Corralation between Mesa Air and Solstad Offshore

Given the investment horizon of 90 days Mesa Air is expected to generate 3.61 times less return on investment than Solstad Offshore. In addition to that, Mesa Air is 1.36 times more volatile than Solstad Offshore ASA. It trades about 0.01 of its total potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.04 per unit of volatility. If you would invest  151.00  in Solstad Offshore ASA on October 4, 2024 and sell it today you would earn a total of  158.00  from holding Solstad Offshore ASA or generate 104.64% return on investment over 90 days.

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

Mesa Air Group  vs.  Solstad Offshore ASA

Mesa Air Group

Risk-Adjusted Performance

3 of 100

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 weak basic indicators, Mesa Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solstad Offshore is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mesa Air and Solstad Offshore

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

The idea behind Mesa Air Group and Solstad Offshore ASA 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.