Correlation Between Nutanix and Pagaya Technologies

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

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

Diversification Opportunities for Nutanix and Pagaya Technologies

0.57

Correlation Coefficient

Nutanix  Pagaya Technologies

Very weak diversification

The 3 months correlation between Nutanix and Pagaya is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nutanix and Pagaya Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pagaya Technologies 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 Pagaya Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pagaya Technologies has no effect on the direction of Nutanix i.e., Nutanix and Pagaya Technologies go up and down completely randomly.

Pair Corralation between Nutanix and Pagaya Technologies

Given the investment horizon of 90 days Nutanix is expected to generate 1.28 times less return on investment than Pagaya Technologies. But when comparing it to its historical volatility, Nutanix is 2.21 times less risky than Pagaya Technologies. It trades about 0.1 of its potential returns per unit of risk. Pagaya Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  951.00  in Pagaya Technologies on December 29, 2024 and sell it today you would earn a total of  115.00  from holding Pagaya Technologies or generate 12.09% return on investment over 90 days.

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

Nutanix  vs.  Pagaya Technologies

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.

Pagaya Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pagaya Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pagaya Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nutanix and Pagaya Technologies

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

The idea behind Nutanix and Pagaya Technologies 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.