Correlation Between Mesa Air and Tesla

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

Diversification Opportunities for Mesa Air and Tesla

-0.05

Correlation Coefficient

Mesa Air  Tesla

Good diversification

The 3 months correlation between Mesa and Tesla is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Mesa Air i.e., Mesa Air and Tesla go up and down completely randomly.

Pair Corralation between Mesa Air and Tesla

Given the investment horizon of 90 days Mesa Air is expected to generate 1.92 times less return on investment than Tesla. In addition to that, Mesa Air is 1.16 times more volatile than Tesla Inc. It trades about 0.19 of its total potential returns per unit of risk. Tesla Inc is currently generating about 0.42 per unit of volatility. If you would invest  33,859  in Tesla Inc on September 25, 2024 and sell it today you would earn a total of  12,369  from holding Tesla Inc or generate 36.53% 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.  Tesla Inc

Mesa Air Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Mesa Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tesla Inc

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Tesla sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesa Air and Tesla

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

The idea behind Mesa Air Group and Tesla Inc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..