Correlation Between Nutanix and Legrand SA

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

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

Diversification Opportunities for Nutanix and Legrand SA

0.62

Correlation Coefficient

Nutanix  Legrand SA

Poor diversification

The 3 months correlation between Nutanix and Legrand is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Nutanix and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of Nutanix i.e., Nutanix and Legrand SA go up and down completely randomly.

Pair Corralation between Nutanix and Legrand SA

Given the investment horizon of 90 days Nutanix is expected to generate 1.32 times more return on investment than Legrand SA. However, Nutanix is 1.32 times more volatile than Legrand SA ADR. It trades about 0.09 of its potential returns per unit of risk. Legrand SA ADR is currently generating about 0.08 per unit of risk. If you would invest  6,157  in Nutanix on December 30, 2024 and sell it today you would earn a total of  945.00  from holding Nutanix or generate 15.35% return on investment over 90 days.

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

Nutanix  vs.  Legrand SA ADR

Nutanix

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 7 (%) 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.

Legrand SA ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Legrand SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Nutanix and Legrand SA

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

The idea behind Nutanix and Legrand SA ADR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.