Correlation Between MKS Instruments and Mesa Laboratories

Can any of the company-specific risk be diversified away by investing in both MKS Instruments and Mesa Laboratories 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 MKS Instruments and Mesa Laboratories into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MKS Instruments and Mesa Laboratories, you can compare the effects of market volatilities on MKS Instruments and Mesa Laboratories 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 MKS Instruments with a short position of Mesa Laboratories. Check out your portfolio center. Please also check ongoing floating volatility patterns of MKS Instruments and Mesa Laboratories.

Diversification Opportunities for MKS Instruments and Mesa Laboratories

0.59

Correlation Coefficient

MKS Instruments  Mesa Laboratories

Very weak diversification

The 3 months correlation between MKS and Mesa is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding MKS Instruments and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories and MKS Instruments 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 MKS Instruments are associated (or correlated) with Mesa Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Laboratories has no effect on the direction of MKS Instruments i.e., MKS Instruments and Mesa Laboratories go up and down completely randomly.

Pair Corralation between MKS Instruments and Mesa Laboratories

Given the investment horizon of 90 days MKS Instruments is expected to under-perform the Mesa Laboratories. In addition to that, MKS Instruments is 1.06 times more volatile than Mesa Laboratories. It trades about -0.09 of its total potential returns per unit of risk. Mesa Laboratories is currently generating about -0.04 per unit of volatility. If you would invest  13,290  in Mesa Laboratories on December 27, 2024 and sell it today you would lose (1,101) from holding Mesa Laboratories or give up 8.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

MKS Instruments  vs.  Mesa Laboratories

MKS Instruments

Risk-Adjusted Performance

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Mesa Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mesa Laboratories 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.

Pair Trading with MKS Instruments and Mesa Laboratories

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

The idea behind MKS Instruments and Mesa Laboratories 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.