Correlation Between Nu Holdings and First Bancshares

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

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

Diversification Opportunities for Nu Holdings and First Bancshares

-0.68

Correlation Coefficient

Nu Holdings  First Bancshares

Excellent diversification

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

Pair Corralation between Nu Holdings and First Bancshares

Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 0.97 times more return on investment than First Bancshares. However, Nu Holdings is 1.03 times less risky than First Bancshares. It trades about 0.09 of its potential returns per unit of risk. First Bancshares is currently generating about 0.04 per unit of risk. If you would invest  490.00  in Nu Holdings on October 26, 2024 and sell it today you would earn a total of  744.00  from holding Nu Holdings or generate 151.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Nu Holdings  vs.  First Bancshares

Nu Holdings

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

First Bancshares

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, First Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nu Holdings and First Bancshares

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

The idea behind Nu Holdings and First Bancshares 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 Stocks Directory module to find actively traded stocks across global markets.