Correlation Between Mesa Air and Universal

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

Diversification Opportunities for Mesa Air and Universal

-0.05

Correlation Coefficient

Mesa Air  Universal

Good diversification

The 3 months correlation between Mesa and Universal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Mesa Air i.e., Mesa Air and Universal go up and down completely randomly.

Pair Corralation between Mesa Air and Universal

Given the investment horizon of 90 days Mesa Air is expected to generate 1.29 times less return on investment than Universal. In addition to that, Mesa Air is 3.37 times more volatile than Universal. It trades about 0.02 of its total potential returns per unit of risk. Universal is currently generating about 0.07 per unit of volatility. If you would invest  5,174  in Universal on September 22, 2024 and sell it today you would earn a total of  289.00  from holding Universal or generate 5.59% 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.  Universal

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 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.

Universal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Mesa Air and Universal

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

The idea behind Mesa Air Group and Universal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.