Correlation Between StoneCo and Nutanix

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

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

Diversification Opportunities for StoneCo and Nutanix

-0.27

Correlation Coefficient

StoneCo  Nutanix

Very good diversification

The 3 months correlation between StoneCo and Nutanix is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding StoneCo and Nutanix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutanix and StoneCo 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 StoneCo are associated (or correlated) with Nutanix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nutanix has no effect on the direction of StoneCo i.e., StoneCo and Nutanix go up and down completely randomly.

Pair Corralation between StoneCo and Nutanix

Given the investment horizon of 90 days StoneCo is expected to under-perform the Nutanix. But the stock apears to be less risky and, when comparing its historical volatility, StoneCo is 1.02 times less risky than Nutanix. The stock trades about -0.45 of its potential returns per unit of risk. The Nutanix is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  7,235  in Nutanix on September 27, 2024 and sell it today you would lose (790.00) from holding Nutanix or give up 10.92% of portfolio value over 90 days.

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

StoneCo  vs.  Nutanix

StoneCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days StoneCo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Nutanix

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Nutanix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with StoneCo and Nutanix

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

The idea behind StoneCo and Nutanix 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.