Correlation Between Mesa Air and Cumberland Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Mesa Air and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals, you can compare the effects of market volatilities on Mesa Air and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and Cumberland Pharmaceuticals.
Diversification Opportunities for Mesa Air and Cumberland Pharmaceuticals
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mesa and Cumberland is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of Mesa Air i.e., Mesa Air and Cumberland Pharmaceuticals go up and down completely randomly.
Pair Corralation between Mesa Air and Cumberland Pharmaceuticals
Given the investment horizon of 90 days Mesa Air Group is expected to generate 1.66 times more return on investment than Cumberland Pharmaceuticals. However, Mesa Air is 1.66 times more volatile than Cumberland Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.34 per unit of risk. If you would invest 92.00 in Mesa Air Group on August 28, 2024 and sell it today you would earn a total of 6.00 from holding Mesa Air Group or generate 6.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mesa Air Group vs. Cumberland Pharmaceuticals
Performance |
| Timeline |
| Mesa Air Group |
| Cumberland Pharmaceuticals |
Mesa Air and Cumberland Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mesa Air and Cumberland Pharmaceuticals
The main advantage of trading using opposite Mesa Air and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air position performs unexpectedly, Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals will offset losses from the drop in Cumberland Pharmaceuticals' long position.| Mesa Air vs. Allegiant Travel | Mesa Air vs. Sun Country Airlines | Mesa Air vs. Frontier Group Holdings | Mesa Air vs. Azul SA |
| Cumberland Pharmaceuticals vs. Capricor Therapeutics | Cumberland Pharmaceuticals vs. Soleno Therapeutics | Cumberland Pharmaceuticals vs. Bio Path Holdings | Cumberland Pharmaceuticals vs. Moleculin Biotech |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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