Correlation Between Nutanix and PagSeguro Digital

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

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

Diversification Opportunities for Nutanix and PagSeguro Digital

0.77

Correlation Coefficient

Nutanix  PagSeguro Digital

Poor diversification

The 3 months correlation between Nutanix and PagSeguro is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nutanix and PagSeguro Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PagSeguro Digital 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 PagSeguro Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PagSeguro Digital has no effect on the direction of Nutanix i.e., Nutanix and PagSeguro Digital go up and down completely randomly.

Pair Corralation between Nutanix and PagSeguro Digital

Given the investment horizon of 90 days Nutanix is expected to generate 1.65 times less return on investment than PagSeguro Digital. But when comparing it to its historical volatility, Nutanix is 1.09 times less risky than PagSeguro Digital. It trades about 0.09 of its potential returns per unit of risk. PagSeguro Digital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  619.00  in PagSeguro Digital on December 30, 2024 and sell it today you would earn a total of  174.00  from holding PagSeguro Digital or generate 28.11% return on investment over 90 days.

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

Nutanix  vs.  PagSeguro Digital

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.

PagSeguro Digital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PagSeguro Digital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, PagSeguro Digital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nutanix and PagSeguro Digital

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

The idea behind Nutanix and PagSeguro Digital 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.