Correlation Between MakeMyTrip and NorAm Drilling

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

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

Diversification Opportunities for MakeMyTrip and NorAm Drilling

-0.78

Correlation Coefficient

MakeMyTrip  NorAm Drilling

Pay attention - limited upside

The 3 months correlation between MakeMyTrip and NorAm is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MakeMyTrip Limited and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of MakeMyTrip i.e., MakeMyTrip and NorAm Drilling go up and down completely randomly.

Pair Corralation between MakeMyTrip and NorAm Drilling

Assuming the 90 days horizon MakeMyTrip Limited is expected to generate 0.58 times more return on investment than NorAm Drilling. However, MakeMyTrip Limited is 1.73 times less risky than NorAm Drilling. It trades about 0.12 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about -0.04 per unit of risk. If you would invest  9,102  in MakeMyTrip Limited on October 5, 2024 and sell it today you would earn a total of  1,753  from holding MakeMyTrip Limited or generate 19.26% 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.  NorAm Drilling AS

MakeMyTrip Limited

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days MakeMyTrip Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, MakeMyTrip reported solid returns over the last few months and may actually be approaching a breakup point.

NorAm Drilling AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NorAm Drilling AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with MakeMyTrip and NorAm Drilling

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

The idea behind MakeMyTrip Limited and NorAm Drilling AS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.