Correlation Between Mesa Air and YHC

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

Diversification Opportunities for Mesa Air and YHC

0.2

Correlation Coefficient

Mesa Air  YHC

Modest diversification

The 3 months correlation between Mesa and YHC is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and YHC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YHC 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 YHC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YHC has no effect on the direction of Mesa Air i.e., Mesa Air and YHC go up and down completely randomly.

Pair Corralation between Mesa Air and YHC

Given the investment horizon of 90 days Mesa Air is expected to generate 2.89 times less return on investment than YHC. But when comparing it to its historical volatility, Mesa Air Group is 2.15 times less risky than YHC. It trades about 0.18 of its potential returns per unit of risk. YHC is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  71.00  in YHC on October 7, 2024 and sell it today you would earn a total of  96.00  from holding YHC or generate 135.21% 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.  YHC

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.

YHC

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YHC are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, YHC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mesa Air and YHC

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

The idea behind Mesa Air Group and YHC 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.