Correlation Between MakeMyTrip and Hanover Insurance

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

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

Diversification Opportunities for MakeMyTrip and Hanover Insurance

0.72

Correlation Coefficient

MakeMyTrip  Hanover Insurance

Poor diversification

The 3 months correlation between MakeMyTrip and Hanover is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding MakeMyTrip Limited and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance and MakeMyTrip 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 MakeMyTrip Limited are associated (or correlated) with Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of MakeMyTrip i.e., MakeMyTrip and Hanover Insurance go up and down completely randomly.

Pair Corralation between MakeMyTrip and Hanover Insurance

Assuming the 90 days horizon MakeMyTrip Limited is expected to generate 2.15 times more return on investment than Hanover Insurance. However, MakeMyTrip is 2.15 times more volatile than The Hanover Insurance. It trades about 0.04 of its potential returns per unit of risk. The Hanover Insurance is currently generating about -0.08 per unit of risk. If you would invest  11,365  in MakeMyTrip Limited on October 9, 2024 and sell it today you would earn a total of  140.00  from holding MakeMyTrip Limited or generate 1.23% return on investment over 90 days.

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

MakeMyTrip Limited  vs.  The Hanover Insurance

MakeMyTrip Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MakeMyTrip Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MakeMyTrip reported solid returns over the last few months and may actually be approaching a breakup point.

Hanover Insurance

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MakeMyTrip and Hanover Insurance

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

The idea behind MakeMyTrip Limited and The Hanover Insurance 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.