Correlation Between Mesa Air and Arcadium Lithium
Can any of the company-specific risk be diversified away by investing in both Mesa Air and Arcadium Lithium 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 Air and Arcadium Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mesa Air Group and Arcadium Lithium plc, you can compare the effects of market volatilities on Mesa Air and Arcadium Lithium 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 Air with a short position of Arcadium Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and Arcadium Lithium.
Diversification Opportunities for Mesa Air and Arcadium Lithium
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Mesa and Arcadium is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Arcadium Lithium plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadium Lithium plc and Mesa 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 Mesa Air Group are associated (or correlated) with Arcadium Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadium Lithium plc has no effect on the direction of Mesa Air i.e., Mesa Air and Arcadium Lithium go up and down completely randomly.
Pair Corralation between Mesa Air and Arcadium Lithium
Given the investment horizon of 90 days Mesa Air Group is expected to under-perform the Arcadium Lithium. But the stock apears to be less risky and, when comparing its historical volatility, Mesa Air Group is 1.47 times less risky than Arcadium Lithium. The stock trades about -0.03 of its potential returns per unit of risk. The Arcadium Lithium plc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 245.00 in Arcadium Lithium plc on September 4, 2024 and sell it today you would earn a total of 271.00 from holding Arcadium Lithium plc or generate 110.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mesa Air Group vs. Arcadium Lithium plc
Performance |
| Timeline |
| Mesa Air Group |
| Arcadium Lithium plc |
Mesa Air and Arcadium Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mesa Air and Arcadium Lithium
The main advantage of trading using opposite Mesa Air and Arcadium Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air position performs unexpectedly, Arcadium Lithium 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 Arcadium Lithium will offset losses from the drop in Arcadium Lithium's long position.| Mesa Air vs. Allegiant Travel | Mesa Air vs. Sun Country Airlines | Mesa Air vs. Frontier Group Holdings | Mesa Air vs. Azul SA |
| Arcadium Lithium vs. Teleflex Incorporated | Arcadium Lithium vs. Saia Inc | Arcadium Lithium vs. Ameriprise Financial | Arcadium Lithium vs. Mesa Air Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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