Correlation Between Nutanix and Cognyte Software

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

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

Diversification Opportunities for Nutanix and Cognyte Software

0.16

Correlation Coefficient

Nutanix  Cognyte Software

Average diversification

The 3 months correlation between Nutanix and Cognyte is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nutanix and Cognyte Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognyte Software 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 Cognyte Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognyte Software has no effect on the direction of Nutanix i.e., Nutanix and Cognyte Software go up and down completely randomly.

Pair Corralation between Nutanix and Cognyte Software

Given the investment horizon of 90 days Nutanix is expected to generate 1.13 times more return on investment than Cognyte Software. However, Nutanix is 1.13 times more volatile than Cognyte Software. It trades about 0.1 of its potential returns per unit of risk. Cognyte Software is currently generating about -0.04 per unit of risk. If you would invest  6,157  in Nutanix on December 29, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nutanix  vs.  Cognyte Software

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 uncertain basic indicators, Nutanix showed solid returns over the last few months and may actually be approaching a breakup point.

Cognyte Software

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognyte Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cognyte Software is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nutanix and Cognyte Software

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

The idea behind Nutanix and Cognyte Software 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.