Correlation Between Verra Mobility and Mesa Air

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

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

Diversification Opportunities for Verra Mobility and Mesa Air

0.69

Correlation Coefficient

Verra Mobility  Mesa Air

Poor diversification

The 3 months correlation between Verra and Mesa is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Verra Mobility Corp 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 Verra Mobility 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 Verra Mobility Corp 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 Verra Mobility i.e., Verra Mobility and Mesa Air go up and down completely randomly.

Pair Corralation between Verra Mobility and Mesa Air

Given the investment horizon of 90 days Verra Mobility Corp is expected to generate about the same return on investment as Mesa Air Group. But, Verra Mobility Corp is 2.14 times less risky than Mesa Air. It trades about -0.09 of its potential returns per unit of risk. Mesa Air Group is currently generating about -0.04 per unit of risk. If you would invest  125.00  in Mesa Air Group on September 14, 2024 and sell it today you would lose (19.00) from holding Mesa Air Group or give up 15.2% of portfolio value over 90 days.

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

Verra Mobility Corp  vs.  Mesa Air Group

Verra Mobility Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verra Mobility Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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 abnormal 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.

Pair Trading with Verra Mobility and Mesa Air

The main advantage of trading using opposite Verra Mobility and Mesa Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verra Mobility 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 Verra Mobility Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.