Correlation Between VMware and Nutanix

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

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

Diversification Opportunities for VMware and Nutanix

0.79

Correlation Coefficient

VMware  Nutanix

Poor diversification

The 3 months correlation between VMware and Nutanix is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Nutanix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nutanix and VMware 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 VMware Inc 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 VMware i.e., VMware and Nutanix go up and down completely randomly.

Pair Corralation between VMware and Nutanix

If you would invest  5,229  in Nutanix on August 28, 2024 and sell it today you would earn a total of  2,051  from holding Nutanix or generate 39.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

VMware Inc  vs.  Nutanix

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Nutanix

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 13 (%) 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.

Pair Trading with VMware and Nutanix

The main advantage of trading using opposite VMware and Nutanix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware 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 VMware Inc 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.