Correlation Between Gen Digital and Nutanix

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

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

Diversification Opportunities for Gen Digital and Nutanix

0.3

Correlation Coefficient

Gen Digital  Nutanix

Weak diversification

The 3 months correlation between Gen and Nutanix is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Gen Digital and Nutanix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutanix and Gen Digital 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 Gen Digital are associated (or correlated) with Nutanix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutanix has no effect on the direction of Gen Digital i.e., Gen Digital and Nutanix go up and down completely randomly.

Pair Corralation between Gen Digital and Nutanix

Considering the 90-day investment horizon Gen Digital is expected to generate 22.49 times less return on investment than Nutanix. But when comparing it to its historical volatility, Gen Digital is 2.29 times less risky than Nutanix. It trades about 0.01 of its potential returns per unit of risk. Nutanix is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  6,157  in Nutanix on December 28, 2024 and sell it today you would earn a total of  1,039  from holding Nutanix or generate 16.88% return on investment over 90 days.

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

Gen Digital  vs.  Nutanix

Gen Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gen Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Gen Digital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Nutanix

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nutanix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gen Digital and Nutanix

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

The idea behind Gen Digital and Nutanix 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.