Correlation Between Meliá Hotels and Blade Air

Can any of the company-specific risk be diversified away by investing in both Meliá Hotels and Blade 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 Meliá Hotels and Blade Air 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 Blade Air Mobility, you can compare the effects of market volatilities on Meliá Hotels and Blade 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 Meliá Hotels with a short position of Blade Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meliá Hotels and Blade Air.

Diversification Opportunities for Meliá Hotels and Blade Air

0.38

Correlation Coefficient

Meliá Hotels  Blade Air

Weak diversification

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

Pair Corralation between Meliá Hotels and Blade Air

Assuming the 90 days horizon Meli Hotels International is expected to under-perform the Blade Air. But the pink sheet apears to be less risky and, when comparing its historical volatility, Meli Hotels International is 2.48 times less risky than Blade Air. The pink sheet trades about -0.03 of its potential returns per unit of risk. The Blade Air Mobility is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  361.00  in Blade Air Mobility on October 24, 2024 and sell it today you would earn a total of  40.00  from holding Blade Air Mobility or generate 11.08% return on investment over 90 days.

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

Meli Hotels International  vs.  Blade Air Mobility

Meli Hotels International

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, Meliá Hotels is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Blade Air Mobility

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blade Air Mobility are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Blade Air exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meliá Hotels and Blade Air

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

The idea behind Meli Hotels International and Blade Air Mobility 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.