Correlation Between NVIDIA and MakeMyTrip

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

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

Diversification Opportunities for NVIDIA and MakeMyTrip

0.24

Correlation Coefficient

NVIDIA  MakeMyTrip

Modest diversification

The 3 months correlation between NVIDIA and MakeMyTrip is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and MakeMyTrip Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MakeMyTrip Limited and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and MakeMyTrip go up and down completely randomly.

Pair Corralation between NVIDIA and MakeMyTrip

Given the investment horizon of 90 days NVIDIA is expected to generate 1.2 times more return on investment than MakeMyTrip. However, NVIDIA is 1.2 times more volatile than MakeMyTrip Limited. It trades about 0.15 of its potential returns per unit of risk. MakeMyTrip Limited is currently generating about 0.12 per unit of risk. If you would invest  1,689  in NVIDIA on October 4, 2024 and sell it today you would earn a total of  11,740  from holding NVIDIA or generate 695.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.0%
Values	Daily Returns

NVIDIA  vs.  MakeMyTrip Limited

NVIDIA

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fragile basic indicators, MakeMyTrip reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and MakeMyTrip

The main advantage of trading using opposite NVIDIA and MakeMyTrip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.