Correlation Between Sportsmans and Mesa Laboratories

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

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

Diversification Opportunities for Sportsmans and Mesa Laboratories

0.24

Correlation Coefficient

Sportsmans  Mesa Laboratories

Modest diversification

The 3 months correlation between Sportsmans and Mesa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sportsmans and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories and Sportsmans 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 Sportsmans 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 Sportsmans i.e., Sportsmans and Mesa Laboratories go up and down completely randomly.

Pair Corralation between Sportsmans and Mesa Laboratories

Given the investment horizon of 90 days Sportsmans is expected to generate 2.08 times less return on investment than Mesa Laboratories. In addition to that, Sportsmans is 2.26 times more volatile than Mesa Laboratories. It trades about 0.06 of its total potential returns per unit of risk. Mesa Laboratories is currently generating about 0.26 per unit of volatility. If you would invest  11,347  in Mesa Laboratories on October 25, 2024 and sell it today you would earn a total of  3,138  from holding Mesa Laboratories or generate 27.65% return on investment over 90 days.

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

Sportsmans  vs.  Mesa Laboratories

Sportsmans

Risk-Adjusted Performance

0 of 100

Very Weak

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

Mesa Laboratories

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Laboratories are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Laboratories sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sportsmans and Mesa Laboratories

The main advantage of trading using opposite Sportsmans and Mesa Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sportsmans 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 Sportsmans 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.