Correlation Between Nu Holdings and First Capital

Can any of the company-specific risk be diversified away by investing in both Nu Holdings and First Capital 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 Capital 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 Capital, you can compare the effects of market volatilities on Nu Holdings and First Capital 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 Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Holdings and First Capital.

Diversification Opportunities for Nu Holdings and First Capital

0.7

Correlation Coefficient

Nu Holdings  First Capital

Poor diversification

The 3 months correlation between Nu Holdings and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital 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 Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Nu Holdings i.e., Nu Holdings and First Capital go up and down completely randomly.

Pair Corralation between Nu Holdings and First Capital

Allowing for the 90-day total investment horizon Nu Holdings is expected to under-perform the First Capital. In addition to that, Nu Holdings is 1.15 times more volatile than First Capital. It trades about -0.04 of its total potential returns per unit of risk. First Capital is currently generating about 0.04 per unit of volatility. If you would invest  2,946  in First Capital on September 30, 2024 and sell it today you would earn a total of  279.00  from holding First Capital or generate 9.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Nu Holdings  vs.  First Capital

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 weak 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.

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First Capital 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 First Capital

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

The idea behind Nu Holdings and First Capital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.