Correlation Between Nutanix and Air China

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

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

Diversification Opportunities for Nutanix and Air China

-0.59

Correlation Coefficient

Nutanix  Air China

Excellent diversification

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

Pair Corralation between Nutanix and Air China

Given the investment horizon of 90 days Nutanix is expected to generate 0.99 times more return on investment than Air China. However, Nutanix is 1.01 times less risky than Air China. It trades about 0.08 of its potential returns per unit of risk. Air China Limited is currently generating about 0.03 per unit of risk. If you would invest  6,381  in Nutanix on February 11, 2024 and sell it today you would earn a total of  377.00  from holding Nutanix or generate 5.91% return on investment over 90 days.

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

Nutanix  vs.  Air China Limited

Nutanix

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nutanix are ranked lower than 10 (%) 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.

Air China Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air China Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Air China is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nutanix and Air China

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

The idea behind Nutanix and Air China Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .