Correlation Between Nutanix and Southwestern Energy

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

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

Diversification Opportunities for Nutanix and Southwestern Energy

-0.59

Correlation Coefficient

Nutanix  Southwestern Energy

Excellent diversification

The 3 months correlation between Nutanix and Southwestern is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nutanix and Southwestern Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwestern Energy 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 Southwestern Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwestern Energy has no effect on the direction of Nutanix i.e., Nutanix and Southwestern Energy go up and down completely randomly.

Pair Corralation between Nutanix and Southwestern Energy

Given the investment horizon of 90 days Nutanix is expected to generate 1.26 times more return on investment than Southwestern Energy. However, Nutanix is 1.26 times more volatile than Southwestern Energy. It trades about 0.08 of its potential returns per unit of risk. Southwestern Energy is currently generating about 0.03 per unit of risk. If you would invest  2,679  in Nutanix on October 3, 2024 and sell it today you would earn a total of  3,439  from holding Nutanix or generate 128.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.27%
Values	Daily Returns

Nutanix  vs.  Southwestern Energy

Nutanix

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Nutanix is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Southwestern Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nutanix and Southwestern Energy

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

The idea behind Nutanix and Southwestern Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.