Correlation Between Parker Hannifin and Mesa Air

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

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

Diversification Opportunities for Parker Hannifin and Mesa Air

-0.3

Correlation Coefficient

Parker Hannifin  Mesa Air

Very good diversification

The 3 months correlation between Parker and Mesa is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Parker Hannifin and Mesa Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Air Group and Parker Hannifin 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 Parker Hannifin are associated (or correlated) with Mesa Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Air Group has no effect on the direction of Parker Hannifin i.e., Parker Hannifin and Mesa Air go up and down completely randomly.

Pair Corralation between Parker Hannifin and Mesa Air

Allowing for the 90-day total investment horizon Parker Hannifin is expected to generate 0.42 times more return on investment than Mesa Air. However, Parker Hannifin is 2.38 times less risky than Mesa Air. It trades about 0.11 of its potential returns per unit of risk. Mesa Air Group is currently generating about -0.02 per unit of risk. If you would invest  50,291  in Parker Hannifin on October 3, 2024 and sell it today you would earn a total of  13,391  from holding Parker Hannifin or generate 26.63% return on investment over 90 days.

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

Parker Hannifin  vs.  Mesa Air Group

Parker Hannifin

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Parker Hannifin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical indicators, Parker Hannifin is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Mesa Air Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Air may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Parker Hannifin and Mesa Air

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

The idea behind Parker Hannifin and Mesa Air Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.