Correlation Between Confluent and Nutanix

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

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

Diversification Opportunities for Confluent and Nutanix

0.81

Correlation Coefficient

Confluent  Nutanix

Very poor diversification

The 3 months correlation between Confluent and Nutanix is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Confluent and Nutanix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutanix and Confluent 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 Confluent 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 Confluent i.e., Confluent and Nutanix go up and down completely randomly.

Pair Corralation between Confluent and Nutanix

Given the investment horizon of 90 days Confluent is expected to generate 1.43 times more return on investment than Nutanix. However, Confluent is 1.43 times more volatile than Nutanix. It trades about 0.24 of its potential returns per unit of risk. Nutanix is currently generating about 0.05 per unit of risk. If you would invest  1,939  in Confluent on September 12, 2024 and sell it today you would earn a total of  1,179  from holding Confluent or generate 60.8% return on investment over 90 days.

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

Confluent  vs.  Nutanix

Confluent

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Confluent are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Confluent unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 abnormal basic indicators, Nutanix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Confluent and Nutanix

The main advantage of trading using opposite Confluent and Nutanix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Confluent 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 Confluent 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.