Correlation Between Mesa Air and 76720AAD8

Can any of the company-specific risk be diversified away by investing in both Mesa Air and 76720AAD8 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 76720AAD8 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 RIO TINTO FIN, you can compare the effects of market volatilities on Mesa Air and 76720AAD8 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 76720AAD8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and 76720AAD8.

Diversification Opportunities for Mesa Air and 76720AAD8

-0.48

Correlation Coefficient

Mesa Air  76720AAD8

Very good diversification

The 3 months correlation between Mesa and 76720AAD8 is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and RIO TINTO FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RIO TINTO FIN 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 76720AAD8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RIO TINTO FIN has no effect on the direction of Mesa Air i.e., Mesa Air and 76720AAD8 go up and down completely randomly.

Pair Corralation between Mesa Air and 76720AAD8

Given the investment horizon of 90 days Mesa Air is expected to generate 113.15 times less return on investment than 76720AAD8. But when comparing it to its historical volatility, Mesa Air Group is 13.75 times less risky than 76720AAD8. It trades about 0.01 of its potential returns per unit of risk. RIO TINTO FIN is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,039  in RIO TINTO FIN on October 7, 2024 and sell it today you would lose (805.00) from holding RIO TINTO FIN or give up 8.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	52.22%
Values	Daily Returns

Mesa Air Group  vs.  RIO TINTO FIN

Mesa Air Group

Risk-Adjusted Performance

3 of 100

Insignificant

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

RIO TINTO FIN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIO TINTO FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 76720AAD8 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and 76720AAD8

The main advantage of trading using opposite Mesa Air and 76720AAD8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air position performs unexpectedly, 76720AAD8 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 76720AAD8 will offset losses from the drop in 76720AAD8's long position.

The idea behind Mesa Air Group and RIO TINTO FIN 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.