Correlation Between Mesa Laboratories and Itron

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

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

Diversification Opportunities for Mesa Laboratories and Itron

-0.37

Correlation Coefficient

Mesa Laboratories  Itron

Very good diversification

The 3 months correlation between Mesa and Itron is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Laboratories and Itron Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itron Inc and Mesa Laboratories 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 Laboratories are associated (or correlated) with Itron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itron Inc has no effect on the direction of Mesa Laboratories i.e., Mesa Laboratories and Itron go up and down completely randomly.

Pair Corralation between Mesa Laboratories and Itron

Given the investment horizon of 90 days Mesa Laboratories is expected to under-perform the Itron. In addition to that, Mesa Laboratories is 1.32 times more volatile than Itron Inc. It trades about -0.02 of its total potential returns per unit of risk. Itron Inc is currently generating about 0.0 per unit of volatility. If you would invest  10,924  in Itron Inc on December 28, 2024 and sell it today you would lose (188.00) from holding Itron Inc or give up 1.72% of portfolio value over 90 days.

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

Mesa Laboratories  vs.  Itron Inc

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 somewhat strong basic indicators, Mesa Laboratories is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Itron Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Itron Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Itron is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Mesa Laboratories and Itron

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

The idea behind Mesa Laboratories and Itron 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.