Correlation Between Mesa Air and Stepstone

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

Diversification Opportunities for Mesa Air and Stepstone

-0.63

Correlation Coefficient

Mesa Air  Stepstone

Excellent diversification

The 3 months correlation between Mesa and Stepstone is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Stepstone Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepstone Group 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 Stepstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepstone Group has no effect on the direction of Mesa Air i.e., Mesa Air and Stepstone go up and down completely randomly.

Pair Corralation between Mesa Air and Stepstone

Given the investment horizon of 90 days Mesa Air Group is expected to generate 1.83 times more return on investment than Stepstone. However, Mesa Air is 1.83 times more volatile than Stepstone Group. It trades about 0.18 of its potential returns per unit of risk. Stepstone Group is currently generating about -0.23 per unit of risk. If you would invest  98.00  in Mesa Air Group on September 25, 2024 and sell it today you would earn a total of  15.00  from holding Mesa Air Group or generate 15.31% return on investment over 90 days.

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

Mesa Air Group  vs.  Stepstone Group

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 abnormal basic indicators, Mesa Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stepstone Group

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, Stepstone may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mesa Air and Stepstone

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

The idea behind Mesa Air Group and Stepstone 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.