Correlation Between Algoma Steel and Mesa Air

Can any of the company-specific risk be diversified away by investing in both Algoma Steel 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 Algoma Steel and Mesa Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algoma Steel Group and Mesa Air Group, you can compare the effects of market volatilities on Algoma Steel 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 Algoma Steel with a short position of Mesa Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and Mesa Air.

Diversification Opportunities for Algoma Steel and Mesa Air

-0.59

Correlation Coefficient

Algoma Steel  Mesa Air

Excellent diversification

The 3 months correlation between Algoma and Mesa is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group 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 Algoma Steel 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 Algoma Steel Group 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 Algoma Steel i.e., Algoma Steel and Mesa Air go up and down completely randomly.

Pair Corralation between Algoma Steel and Mesa Air

Given the investment horizon of 90 days Algoma Steel Group is expected to generate 0.37 times more return on investment than Mesa Air. However, Algoma Steel Group is 2.67 times less risky than Mesa Air. It trades about 0.05 of its potential returns per unit of risk. Mesa Air Group is currently generating about 0.02 per unit of risk. If you would invest  596.00  in Algoma Steel Group on September 23, 2024 and sell it today you would earn a total of  346.00  from holding Algoma Steel Group or generate 58.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Algoma Steel Group  vs.  Mesa Air Group

Algoma Steel Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Algoma Steel Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Algoma Steel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Mesa Air Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mesa Air is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algoma Steel and Mesa Air

The main advantage of trading using opposite Algoma Steel and Mesa Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel 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.

The idea behind Algoma Steel Group and Mesa Air Group 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.