Correlation Between MakeMyTrip and Applied Materials

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

By analyzing existing cross correlation between MakeMyTrip Limited and Applied Materials, you can compare the effects of market volatilities on MakeMyTrip and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of MakeMyTrip and Applied Materials.

Diversification Opportunities for MakeMyTrip and Applied Materials

-0.62

Correlation Coefficient

MakeMyTrip  Applied Materials

Excellent diversification

The 3 months correlation between MakeMyTrip and Applied is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding MakeMyTrip Limited and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of MakeMyTrip i.e., MakeMyTrip and Applied Materials go up and down completely randomly.

Pair Corralation between MakeMyTrip and Applied Materials

Assuming the 90 days horizon MakeMyTrip Limited is expected to generate 1.01 times more return on investment than Applied Materials. However, MakeMyTrip is 1.01 times more volatile than Applied Materials. It trades about 0.11 of its potential returns per unit of risk. Applied Materials is currently generating about -0.06 per unit of risk. If you would invest  9,302  in MakeMyTrip Limited on October 13, 2024 and sell it today you would earn a total of  1,508  from holding MakeMyTrip Limited or generate 16.21% return on investment over 90 days.

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

MakeMyTrip Limited  vs.  Applied Materials

MakeMyTrip Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MakeMyTrip Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MakeMyTrip reported solid returns over the last few months and may actually be approaching a breakup point.

Applied Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials 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.

Pair Trading with MakeMyTrip and Applied Materials

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

The idea behind MakeMyTrip Limited and Applied Materials 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.