Correlation Between Nu Holdings and Esquire Financial

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

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

Diversification Opportunities for Nu Holdings and Esquire Financial

0.68

Correlation Coefficient

Nu Holdings  Esquire Financial

Poor diversification

The 3 months correlation between Nu Holdings and Esquire is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and Esquire Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esquire Financial 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 Esquire Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esquire Financial has no effect on the direction of Nu Holdings i.e., Nu Holdings and Esquire Financial go up and down completely randomly.

Pair Corralation between Nu Holdings and Esquire Financial

Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 1.82 times more return on investment than Esquire Financial. However, Nu Holdings is 1.82 times more volatile than Esquire Financial Holdings. It trades about 0.01 of its potential returns per unit of risk. Esquire Financial Holdings is currently generating about -0.04 per unit of risk. If you would invest  1,065  in Nu Holdings on December 29, 2024 and sell it today you would lose (30.00) from holding Nu Holdings or give up 2.82% of portfolio value over 90 days.

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

Nu Holdings  vs.  Esquire Financial Holdings

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 comparatively stable basic indicators, Nu Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Esquire Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Esquire Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Esquire Financial is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nu Holdings and Esquire Financial

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

The idea behind Nu Holdings and Esquire Financial Holdings 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.