Correlation Between Mesa Laboratories and Know Labs

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

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

Diversification Opportunities for Mesa Laboratories and Know Labs

0.35

Correlation Coefficient

Mesa Laboratories  Know Labs

Weak diversification

The 3 months correlation between Mesa and Know is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Laboratories and Know Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Know Labs 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 Know Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Know Labs has no effect on the direction of Mesa Laboratories i.e., Mesa Laboratories and Know Labs go up and down completely randomly.

Pair Corralation between Mesa Laboratories and Know Labs

Given the investment horizon of 90 days Mesa Laboratories is expected to generate 0.74 times more return on investment than Know Labs. However, Mesa Laboratories is 1.34 times less risky than Know Labs. It trades about -0.04 of its potential returns per unit of risk. Know Labs is currently generating about -0.04 per unit of risk. If you would invest  13,369  in Mesa Laboratories on August 30, 2024 and sell it today you would lose (1,534) from holding Mesa Laboratories or give up 11.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Mesa Laboratories  vs.  Know Labs

Mesa Laboratories

Risk-Adjusted Performance

0 of 100

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.

Know Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Know Labs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Mesa Laboratories and Know Labs

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

The idea behind Mesa Laboratories and Know Labs 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.