Correlation Between Nu Holdings and UBS Group

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

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

Diversification Opportunities for Nu Holdings and UBS Group

0.51

Correlation Coefficient

Nu Holdings  UBS Group

Very weak diversification

The 3 months correlation between Nu Holdings and UBS is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and UBS Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Group AG 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 UBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Group AG has no effect on the direction of Nu Holdings i.e., Nu Holdings and UBS Group go up and down completely randomly.

Pair Corralation between Nu Holdings and UBS Group

Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 2.83 times less return on investment than UBS Group. In addition to that, Nu Holdings is 1.76 times more volatile than UBS Group AG. It trades about 0.01 of its total potential returns per unit of risk. UBS Group AG is currently generating about 0.03 per unit of volatility. If you would invest  3,060  in UBS Group AG on December 28, 2024 and sell it today you would earn a total of  96.00  from holding UBS Group AG or generate 3.14% 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.  UBS Group AG

Nu Holdings

Risk-Adjusted Performance

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.

UBS Group AG

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Group AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, UBS Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nu Holdings and UBS Group

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

The idea behind Nu Holdings and UBS Group AG 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.