Correlation Between LATAM Airlines and Mesa Air

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

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

Diversification Opportunities for LATAM Airlines and Mesa Air

0.04

Correlation Coefficient

LATAM Airlines  Mesa Air

Significant diversification

The 3 months correlation between LATAM and Mesa is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding LATAM Airlines Group 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 LATAM Airlines 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 LATAM Airlines Group 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 LATAM Airlines i.e., LATAM Airlines and Mesa Air go up and down completely randomly.

Pair Corralation between LATAM Airlines and Mesa Air

If you would invest  81.00  in Mesa Air Group on February 17, 2024 and sell it today you would earn a total of  9.00  from holding Mesa Air Group or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

LATAM Airlines Group  vs.  Mesa Air Group

LATAM Airlines Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LATAM Airlines Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, LATAM Airlines is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the 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 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 LATAM Airlines and Mesa Air

The main advantage of trading using opposite LATAM Airlines and Mesa Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LATAM Airlines 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 LATAM Airlines Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.