Correlation Between Nu Holdings and BankFinancial

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

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

Diversification Opportunities for Nu Holdings and BankFinancial

0.5

Correlation Coefficient

Nu Holdings  BankFinancial

Very weak diversification

The 3 months correlation between Nu Holdings and BankFinancial is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and BankFinancial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFinancial and Nu Holdings 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 Nu Holdings are associated (or correlated) with BankFinancial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFinancial has no effect on the direction of Nu Holdings i.e., Nu Holdings and BankFinancial go up and down completely randomly.

Pair Corralation between Nu Holdings and BankFinancial

Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 1.6 times more return on investment than BankFinancial. However, Nu Holdings is 1.6 times more volatile than BankFinancial. It trades about 0.08 of its potential returns per unit of risk. BankFinancial is currently generating about 0.07 per unit of risk. If you would invest  452.00  in Nu Holdings on December 2, 2024 and sell it today you would earn a total of  623.00  from holding Nu Holdings or generate 137.83% return on investment over 90 days.

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

Nu Holdings  vs.  BankFinancial

Nu Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nu Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BankFinancial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Nu Holdings and BankFinancial

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

The idea behind Nu Holdings and BankFinancial 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 CEOs Directory module to screen CEOs from public companies around the world.