Correlation Between Cepton and Mesa Laboratories

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

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

Diversification Opportunities for Cepton and Mesa Laboratories

0.07

Correlation Coefficient

Cepton  Mesa Laboratories

Significant diversification

The 3 months correlation between Cepton and Mesa is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories and Cepton 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 Cepton Inc are associated (or correlated) with Mesa Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Laboratories has no effect on the direction of Cepton i.e., Cepton and Mesa Laboratories go up and down completely randomly.

Pair Corralation between Cepton and Mesa Laboratories

Given the investment horizon of 90 days Cepton Inc is expected to under-perform the Mesa Laboratories. In addition to that, Cepton is 1.79 times more volatile than Mesa Laboratories. It trades about -0.02 of its total potential returns per unit of risk. Mesa Laboratories is currently generating about 0.0 per unit of volatility. If you would invest  16,109  in Mesa Laboratories on September 13, 2024 and sell it today you would lose (3,231) from holding Mesa Laboratories or give up 20.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cepton Inc  vs.  Mesa Laboratories

Cepton Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mesa Laboratories

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Laboratories may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cepton and Mesa Laboratories

The main advantage of trading using opposite Cepton and Mesa Laboratories positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cepton position performs unexpectedly, Mesa Laboratories 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 Laboratories will offset losses from the drop in Mesa Laboratories' long position.

The idea behind Cepton Inc and Mesa Laboratories 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.