Correlation Between Nutanix and Xero

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

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

Diversification Opportunities for Nutanix and Xero

0.74

Correlation Coefficient

Nutanix  Xero

Poor diversification

The 3 months correlation between Nutanix and Xero is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nutanix and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Nutanix 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 Nutanix are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Nutanix i.e., Nutanix and Xero go up and down completely randomly.

Pair Corralation between Nutanix and Xero

Assuming the 90 days horizon Nutanix is expected to generate 1.04 times more return on investment than Xero. However, Nutanix is 1.04 times more volatile than Xero. It trades about 0.08 of its potential returns per unit of risk. Xero is currently generating about 0.07 per unit of risk. If you would invest  2,656  in Nutanix on October 15, 2024 and sell it today you would earn a total of  3,410  from holding Nutanix or generate 128.39% return on investment over 90 days.

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

Nutanix  vs.  Xero

Nutanix

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nutanix is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xero

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xero may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nutanix and Xero

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

The idea behind Nutanix and Xero 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.