Correlation Between GreenTree Hospitality and MakeMyTrip

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

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

Diversification Opportunities for GreenTree Hospitality and MakeMyTrip

-0.42

Correlation Coefficient

GreenTree Hospitality  MakeMyTrip

Very good diversification

The 3 months correlation between GreenTree and MakeMyTrip is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding GreenTree Hospitality Group and MakeMyTrip Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MakeMyTrip Limited and GreenTree Hospitality 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 GreenTree Hospitality Group 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 GreenTree Hospitality i.e., GreenTree Hospitality and MakeMyTrip go up and down completely randomly.

Pair Corralation between GreenTree Hospitality and MakeMyTrip

Considering the 90-day investment horizon GreenTree Hospitality is expected to generate 1.24 times less return on investment than MakeMyTrip. In addition to that, GreenTree Hospitality is 1.0 times more volatile than MakeMyTrip Limited. It trades about 0.06 of its total potential returns per unit of risk. MakeMyTrip Limited is currently generating about 0.07 per unit of volatility. If you would invest  10,337  in MakeMyTrip Limited on September 14, 2024 and sell it today you would earn a total of  1,380  from holding MakeMyTrip Limited or generate 13.35% return on investment over 90 days.

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

GreenTree Hospitality Group  vs.  MakeMyTrip Limited

GreenTree Hospitality

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GreenTree Hospitality Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, GreenTree Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

MakeMyTrip Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MakeMyTrip Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, MakeMyTrip unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GreenTree Hospitality and MakeMyTrip

The main advantage of trading using opposite GreenTree Hospitality and MakeMyTrip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenTree Hospitality 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 GreenTree Hospitality Group 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.