Correlation Between Cebu Air and Mesa Air
Can any of the company-specific risk be diversified away by investing in both Cebu Air 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 Cebu Air and Mesa Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cebu Air ADR and Mesa Air Group, you can compare the effects of market volatilities on Cebu Air 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 Cebu Air with a short position of Mesa Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and Mesa Air.
Diversification Opportunities for Cebu Air and Mesa Air
Poor diversification
The 3 months correlation between Cebu and Mesa is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR 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 Cebu Air 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 Cebu Air ADR 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 Cebu Air i.e., Cebu Air and Mesa Air go up and down completely randomly.
Pair Corralation between Cebu Air and Mesa Air
Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the Mesa Air. In addition to that, Cebu Air is 1.13 times more volatile than Mesa Air Group. It trades about -0.21 of its total potential returns per unit of risk. Mesa Air Group is currently generating about -0.12 per unit of volatility. If you would invest 94.00 in Mesa Air Group on August 24, 2024 and sell it today you would lose (7.00) from holding Mesa Air Group or give up 7.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cebu Air ADR vs. Mesa Air Group
Performance |
| Timeline |
| Cebu Air ADR |
| Mesa Air Group |
Cebu Air and Mesa Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and Mesa Air
The main advantage of trading using opposite Cebu Air and Mesa Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air 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.| Cebu Air vs. Finnair Oyj | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air New Zealand |
| Mesa Air vs. Allegiant Travel | Mesa Air vs. Sun Country Airlines | Mesa Air vs. Frontier Group Holdings | Mesa Air vs. Azul SA |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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