Correlation Between Mesa Air and Norfolk Southern
Can any of the company-specific risk be diversified away by investing in both Mesa Air and Norfolk Southern 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 Norfolk Southern 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 Norfolk Southern, you can compare the effects of market volatilities on Mesa Air and Norfolk Southern 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 Norfolk Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and Norfolk Southern.
Diversification Opportunities for Mesa Air and Norfolk Southern
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Mesa and Norfolk is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Norfolk Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norfolk Southern 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 Norfolk Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norfolk Southern has no effect on the direction of Mesa Air i.e., Mesa Air and Norfolk Southern go up and down completely randomly.
Pair Corralation between Mesa Air and Norfolk Southern
Given the investment horizon of 90 days Mesa Air is expected to generate 4.02 times less return on investment than Norfolk Southern. In addition to that, Mesa Air is 4.05 times more volatile than Norfolk Southern. It trades about 0.0 of its total potential returns per unit of risk. Norfolk Southern is currently generating about 0.02 per unit of volatility. If you would invest 24,234 in Norfolk Southern on September 3, 2024 and sell it today you would earn a total of 3,351 from holding Norfolk Southern or generate 13.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mesa Air Group vs. Norfolk Southern
Performance |
| Timeline |
| Mesa Air Group |
| Norfolk Southern |
Mesa Air and Norfolk Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mesa Air and Norfolk Southern
The main advantage of trading using opposite Mesa Air and Norfolk Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air position performs unexpectedly, Norfolk Southern 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 Norfolk Southern will offset losses from the drop in Norfolk Southern'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 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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