Correlation Between Mesa Air and Cardinal Health

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

Diversification Opportunities for Mesa Air and Cardinal Health

-0.41

Correlation Coefficient

Mesa Air  Cardinal Health

Very good diversification

The 3 months correlation between Mesa and Cardinal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Mesa Air i.e., Mesa Air and Cardinal Health go up and down completely randomly.

Pair Corralation between Mesa Air and Cardinal Health

Given the investment horizon of 90 days Mesa Air Group is expected to under-perform the Cardinal Health. In addition to that, Mesa Air is 2.7 times more volatile than Cardinal Health. It trades about -0.04 of its total potential returns per unit of risk. Cardinal Health is currently generating about 0.05 per unit of volatility. If you would invest  11,276  in Cardinal Health on September 16, 2024 and sell it today you would earn a total of  534.00  from holding Cardinal Health or generate 4.74% 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.  Cardinal Health

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 latest conflicting performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cardinal Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cardinal Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Cardinal Health is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Mesa Air and Cardinal Health

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

The idea behind Mesa Air Group and Cardinal Health 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.