Correlation Between Mesa Air and Elanco

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

Diversification Opportunities for Mesa Air and Elanco

0.01

Correlation Coefficient

Mesa Air  Elanco

Significant diversification

The 3 months correlation between Mesa and Elanco is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Elanco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elanco Animal Health 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 Elanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elanco Animal Health has no effect on the direction of Mesa Air i.e., Mesa Air and Elanco go up and down completely randomly.

Pair Corralation between Mesa Air and Elanco

Given the investment horizon of 90 days Mesa Air Group is expected to under-perform the Elanco. In addition to that, Mesa Air is 14.51 times more volatile than Elanco Animal Health. It trades about -0.04 of its total potential returns per unit of risk. Elanco Animal Health is currently generating about -0.12 per unit of volatility. If you would invest  10,400  in Elanco Animal Health on September 16, 2024 and sell it today you would lose (227.00) from holding Elanco Animal Health or give up 2.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Mesa Air Group  vs.  Elanco Animal Health

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 uncertain 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.

Elanco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elanco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Elanco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and Elanco

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

The idea behind Mesa Air Group and Elanco Animal Health 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 Transaction History module to view history of all your transactions and understand their impact on performance.