Correlation Between Mesa Air and LOEWS

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Can any of the company-specific risk be diversified away by investing in both Mesa Air and LOEWS 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 LOEWS 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 LOEWS P 375, you can compare the effects of market volatilities on Mesa Air and LOEWS 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 LOEWS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and LOEWS.

Diversification Opportunities for Mesa Air and LOEWS

0.48
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Mesa and LOEWS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and LOEWS P 375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOEWS P 375 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 LOEWS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOEWS P 375 has no effect on the direction of Mesa Air i.e., Mesa Air and LOEWS go up and down completely randomly.

Pair Corralation between Mesa Air and LOEWS

Given the investment horizon of 90 days Mesa Air Group is expected to generate 18.98 times more return on investment than LOEWS. However, Mesa Air is 18.98 times more volatile than LOEWS P 375. It trades about 0.02 of its potential returns per unit of risk. LOEWS P 375 is currently generating about 0.0 per unit of risk. If you would invest  146.00  in Mesa Air Group on August 30, 2024 and sell it today you would lose (34.00) from holding Mesa Air Group or give up 23.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy91.92%
ValuesDaily Returns

Mesa Air Group  vs.  LOEWS P 375

 Performance 
       Timeline  
Mesa Air Group 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Mesa Air Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Mesa Air is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
LOEWS P 375 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days LOEWS P 375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LOEWS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Mesa Air and LOEWS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mesa Air and LOEWS

The main advantage of trading using opposite Mesa Air and LOEWS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesa Air position performs unexpectedly, LOEWS 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 LOEWS will offset losses from the drop in LOEWS's long position.
The idea behind Mesa Air Group and LOEWS P 375 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.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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