Correlation Between Mesa Air and JetBlue Airways

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

Diversification Opportunities for Mesa Air and JetBlue Airways

-0.47

Correlation Coefficient

Mesa Air  JetBlue Airways

Very good diversification

The 3 months correlation between Mesa and JetBlue is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mesa Air Group and JetBlue Airways Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways Corp 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways Corp has no effect on the direction of Mesa Air i.e., Mesa Air and JetBlue Airways go up and down completely randomly.

Pair Corralation between Mesa Air and JetBlue Airways

Given the investment horizon of 90 days Mesa Air Group is expected to generate 0.57 times more return on investment than JetBlue Airways. However, Mesa Air Group is 1.76 times less risky than JetBlue Airways. It trades about 0.17 of its potential returns per unit of risk. JetBlue Airways Corp is currently generating about -0.12 per unit of risk. If you would invest  81.00  in Mesa Air Group on February 4, 2024 and sell it today you would earn a total of  8.00  from holding Mesa Air Group or generate 9.88% return on investment over 90 days.

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

Mesa Air Group  vs.  JetBlue Airways Corp

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.

JetBlue Airways Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JetBlue Airways Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady essential indicators, JetBlue Airways may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Mesa Air and JetBlue Airways

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

The idea behind Mesa Air Group and JetBlue Airways Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.