Correlation Between Blade Air and Archer Aviation

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

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

Diversification Opportunities for Blade Air and Archer Aviation

0.38

Correlation Coefficient

Blade Air  Archer Aviation

Weak diversification

The 3 months correlation between Blade and Archer is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Blade Air Mobility and Archer Aviation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation and Blade 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 Blade Air Mobility are associated (or correlated) with Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation has no effect on the direction of Blade Air i.e., Blade Air and Archer Aviation go up and down completely randomly.

Pair Corralation between Blade Air and Archer Aviation

Given the investment horizon of 90 days Blade Air Mobility is expected to under-perform the Archer Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Blade Air Mobility is 1.76 times less risky than Archer Aviation. The stock trades about -0.1 of its potential returns per unit of risk. The Archer Aviation is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  957.00  in Archer Aviation on November 29, 2024 and sell it today you would lose (122.00) from holding Archer Aviation or give up 12.75% of portfolio value over 90 days.

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

Blade Air Mobility  vs.  Archer Aviation

Blade Air Mobility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blade Air Mobility has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Archer Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Archer Aviation is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Blade Air and Archer Aviation

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

The idea behind Blade Air Mobility and Archer Aviation 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.