Correlation Between Banco Santander and Nu Holdings

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

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

Diversification Opportunities for Banco Santander and Nu Holdings

0.08

Correlation Coefficient

Banco Santander  Nu Holdings

Significant diversification

The 3 months correlation between Banco and Nu Holdings is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Banco Santander SA and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings and Banco Santander 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 Banco Santander SA are associated (or correlated) with Nu Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nu Holdings has no effect on the direction of Banco Santander i.e., Banco Santander and Nu Holdings go up and down completely randomly.

Pair Corralation between Banco Santander and Nu Holdings

Considering the 90-day investment horizon Banco Santander SA is expected to generate 0.63 times more return on investment than Nu Holdings. However, Banco Santander SA is 1.58 times less risky than Nu Holdings. It trades about -0.01 of its potential returns per unit of risk. Nu Holdings is currently generating about -0.09 per unit of risk. If you would invest  469.00  in Banco Santander SA on September 3, 2024 and sell it today you would lose (7.00) from holding Banco Santander SA or give up 1.49% of portfolio value over 90 days.

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

Banco Santander SA  vs.  Nu Holdings

Banco Santander SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Banco Santander and Nu Holdings

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

The idea behind Banco Santander SA and Nu 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..