Correlation Between Carnival and MakeMyTrip

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

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

Diversification Opportunities for Carnival and MakeMyTrip

-0.12

Correlation Coefficient

Carnival  MakeMyTrip

Good diversification

The 3 months correlation between Carnival and MakeMyTrip is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Carnival and MakeMyTrip Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MakeMyTrip Limited and Carnival 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 Carnival 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 Carnival i.e., Carnival and MakeMyTrip go up and down completely randomly.

Pair Corralation between Carnival and MakeMyTrip

Considering the 90-day investment horizon Carnival is expected to under-perform the MakeMyTrip. But the stock apears to be less risky and, when comparing its historical volatility, Carnival is 1.55 times less risky than MakeMyTrip. The stock trades about -0.24 of its potential returns per unit of risk. The MakeMyTrip Limited is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  6,804  in MakeMyTrip Limited on January 25, 2024 and sell it today you would lose (250.00) from holding MakeMyTrip Limited or give up 3.67% of portfolio value over 90 days.

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

Carnival  vs.  MakeMyTrip Limited

Carnival

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carnival has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

MakeMyTrip Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MakeMyTrip Limited are ranked lower than 14 (%) 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 Carnival and MakeMyTrip

The main advantage of trading using opposite Carnival and MakeMyTrip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival 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 Carnival 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.