Correlation Between Coherent and Mesa Laboratories

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

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

Diversification Opportunities for Coherent and Mesa Laboratories

-0.11

Correlation Coefficient

Coherent  Mesa Laboratories

Good diversification

The 3 months correlation between Coherent and Mesa is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Coherent and Mesa Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesa Laboratories and Coherent 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 Coherent are associated (or correlated) with Mesa Laboratories. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesa Laboratories has no effect on the direction of Coherent i.e., Coherent and Mesa Laboratories go up and down completely randomly.

Pair Corralation between Coherent and Mesa Laboratories

Given the investment horizon of 90 days Coherent is expected to under-perform the Mesa Laboratories. In addition to that, Coherent is 1.33 times more volatile than Mesa Laboratories. It trades about -0.03 of its total potential returns per unit of risk. Mesa Laboratories is currently generating about 0.27 per unit of volatility. If you would invest  11,714  in Mesa Laboratories on September 30, 2024 and sell it today you would earn a total of  1,592  from holding Mesa Laboratories or generate 13.59% return on investment over 90 days.

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

Coherent  vs.  Mesa Laboratories

Coherent

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Coherent are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Coherent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mesa Laboratories

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mesa Laboratories are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesa Laboratories may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Coherent and Mesa Laboratories

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

The idea behind Coherent and Mesa Laboratories 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.