Correlation Between Mesa Air and LILLY

Can any of the company-specific risk be diversified away by investing in both Mesa Air and LILLY 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 LILLY 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 LILLY ELI 7125, you can compare the effects of market volatilities on Mesa Air and LILLY 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 LILLY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mesa Air and LILLY.

Diversification Opportunities for Mesa Air and LILLY

0.17

Correlation Coefficient

Mesa Air  LILLY

Average diversification

The 3 months correlation between Mesa and LILLY is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and LILLY ELI 7125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LILLY ELI 7125 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 LILLY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LILLY ELI 7125 has no effect on the direction of Mesa Air i.e., Mesa Air and LILLY go up and down completely randomly.

Pair Corralation between Mesa Air and LILLY

Given the investment horizon of 90 days Mesa Air Group is expected to under-perform the LILLY. In addition to that, Mesa Air is 7.32 times more volatile than LILLY ELI 7125. It trades about -0.03 of its total potential returns per unit of risk. LILLY ELI 7125 is currently generating about 0.03 per unit of volatility. If you would invest  10,133  in LILLY ELI 7125 on September 13, 2024 and sell it today you would earn a total of  56.00  from holding LILLY ELI 7125 or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	72.09%
Values	Daily Returns

Mesa Air Group  vs.  LILLY ELI 7125

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 uncertain 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.

LILLY ELI 7125

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LILLY ELI 7125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LILLY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesa Air and LILLY

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

The idea behind Mesa Air Group and LILLY ELI 7125 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.

Check out your portfolio center.

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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.