Correlation Between Winmark and Mesa Laboratories

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

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

Diversification Opportunities for Winmark and Mesa Laboratories

0.6

Correlation Coefficient

Winmark  Mesa Laboratories

Poor diversification

The 3 months correlation between Winmark and Mesa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Winmark and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories and Winmark 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 Winmark 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 Winmark i.e., Winmark and Mesa Laboratories go up and down completely randomly.

Pair Corralation between Winmark and Mesa Laboratories

Given the investment horizon of 90 days Winmark is expected to under-perform the Mesa Laboratories. But the stock apears to be less risky and, when comparing its historical volatility, Winmark is 1.7 times less risky than Mesa Laboratories. The stock trades about -0.2 of its potential returns per unit of risk. The Mesa Laboratories is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  13,188  in Mesa Laboratories on December 28, 2024 and sell it today you would lose (1,231) from holding Mesa Laboratories or give up 9.33% of portfolio value over 90 days.

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

Winmark  vs.  Mesa Laboratories

Winmark

Risk-Adjusted Performance

Very Weak

Over the last 90 days Winmark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Winmark and Mesa Laboratories

The main advantage of trading using opposite Winmark and Mesa Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winmark 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 Winmark 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.