Correlation Between Mesa Air and Air France-KLM

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

Diversification Opportunities for Mesa Air and Air France-KLM

-0.1

Correlation Coefficient

Mesa Air  Air France-KLM

Good diversification

The 3 months correlation between Mesa and Air is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Mesa Air i.e., Mesa Air and Air France-KLM go up and down completely randomly.

Pair Corralation between Mesa Air and Air France-KLM

Given the investment horizon of 90 days Mesa Air Group is expected to generate 1.09 times more return on investment than Air France-KLM. However, Mesa Air is 1.09 times more volatile than Air France KLM SA. It trades about 0.25 of its potential returns per unit of risk. Air France KLM SA is currently generating about -0.19 per unit of risk. If you would invest  91.00  in Mesa Air Group on August 31, 2024 and sell it today you would earn a total of  21.00  from holding Mesa Air Group or generate 23.08% return on investment over 90 days.

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

Mesa Air Group  vs.  Air France KLM SA

Mesa Air Group

Risk-Adjusted Performance

0 of 100

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.

Air France KLM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air France KLM SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air France-KLM is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mesa Air and Air France-KLM

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

The idea behind Mesa Air Group and Air France KLM SA 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.