Correlation Between TRAINLINE PLC and MakeMyTrip

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

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

Diversification Opportunities for TRAINLINE PLC and MakeMyTrip

0.79

Correlation Coefficient

TRAINLINE PLC  MakeMyTrip

Poor diversification

The 3 months correlation between TRAINLINE and MakeMyTrip is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and MakeMyTrip Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MakeMyTrip Limited and TRAINLINE PLC 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 TRAINLINE PLC LS are associated (or correlated) with MakeMyTrip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MakeMyTrip Limited has no effect on the direction of TRAINLINE PLC i.e., TRAINLINE PLC and MakeMyTrip go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and MakeMyTrip

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 0.67 times more return on investment than MakeMyTrip. However, TRAINLINE PLC LS is 1.49 times less risky than MakeMyTrip. It trades about 0.18 of its potential returns per unit of risk. MakeMyTrip Limited is currently generating about 0.06 per unit of risk. If you would invest  394.00  in TRAINLINE PLC LS on September 23, 2024 and sell it today you would earn a total of  116.00  from holding TRAINLINE PLC LS or generate 29.44% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  MakeMyTrip Limited

TRAINLINE PLC LS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

MakeMyTrip Limited

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with TRAINLINE PLC and MakeMyTrip

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

The idea behind TRAINLINE PLC LS and MakeMyTrip Limited 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.