Correlation Between Turning Point and Mesa Air

Can any of the company-specific risk be diversified away by investing in both Turning Point and Mesa Air 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 Turning Point and Mesa Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Turning Point Brands and Mesa Air Group, you can compare the effects of market volatilities on Turning Point and Mesa Air 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 Turning Point with a short position of Mesa Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Mesa Air.

Diversification Opportunities for Turning Point and Mesa Air

-0.31

Correlation Coefficient

Turning Point  Mesa Air

Very good diversification

The 3 months correlation between Turning and Mesa is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Mesa Air Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Air Group and Turning Point 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 Turning Point Brands are associated (or correlated) with Mesa Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Air Group has no effect on the direction of Turning Point i.e., Turning Point and Mesa Air go up and down completely randomly.

Pair Corralation between Turning Point and Mesa Air

Considering the 90-day investment horizon Turning Point Brands is expected to generate 0.46 times more return on investment than Mesa Air. However, Turning Point Brands is 2.16 times less risky than Mesa Air. It trades about 0.27 of its potential returns per unit of risk. Mesa Air Group is currently generating about 0.02 per unit of risk. If you would invest  4,208  in Turning Point Brands on September 22, 2024 and sell it today you would earn a total of  1,706  from holding Turning Point Brands or generate 40.54% return on investment over 90 days.

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

Turning Point Brands  vs.  Mesa Air Group

Turning Point Brands

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Turning Point and Mesa Air

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

The idea behind Turning Point Brands and Mesa Air 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.