Correlation Between Meliá Hotels and Air Lease

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

By analyzing existing cross correlation between Meli Hotels International and Air Lease, you can compare the effects of market volatilities on Meliá Hotels and Air Lease 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 Meliá Hotels with a short position of Air Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Air Lease.

Diversification Opportunities for Meliá Hotels and Air Lease

0.26

Correlation Coefficient

Meliá Hotels  Air Lease

Modest diversification

The 3 months correlation between Meliá and Air is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Meli Hotels International and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease and Meliá Hotels 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 Meli Hotels International are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Meliá Hotels i.e., Meliá Hotels and Air Lease go up and down completely randomly.

Pair Corralation between Meliá Hotels and Air Lease

Assuming the 90 days horizon Meli Hotels International is expected to under-perform the Air Lease. But the stock apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 1.17 times less risky than Air Lease. The stock trades about -0.12 of its potential returns per unit of risk. The Air Lease is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,560  in Air Lease on December 19, 2024 and sell it today you would lose (360.00) from holding Air Lease or give up 7.89% of portfolio value over 90 days.

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

Meli Hotels International  vs.  Air Lease

Meli Hotels International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meli Hotels International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Meliá Hotels and Air Lease

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

The idea behind Meli Hotels International and Air Lease 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.

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.