Correlation Between Mesa Air and NetEase

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

Diversification Opportunities for Mesa Air and NetEase

0.69

Correlation Coefficient

Mesa Air  NetEase

Poor diversification

The 3 months correlation between Mesa and NetEase is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Mesa Air i.e., Mesa Air and NetEase go up and down completely randomly.

Pair Corralation between Mesa Air and NetEase

Given the investment horizon of 90 days Mesa Air Group is expected to generate 1.63 times more return on investment than NetEase. However, Mesa Air is 1.63 times more volatile than NetEase. It trades about 0.07 of its potential returns per unit of risk. NetEase is currently generating about -0.01 per unit of risk. If you would invest  114.00  in Mesa Air Group on October 1, 2024 and sell it today you would earn a total of  17.00  from holding Mesa Air Group or generate 14.91% return on investment over 90 days.

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

Mesa Air Group  vs.  NetEase

Mesa Air Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Air Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Air sustained solid returns over the last few months and may actually be approaching a breakup point.

NetEase

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NetEase has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, NetEase is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mesa Air and NetEase

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

The idea behind Mesa Air Group and NetEase 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.