Correlation Between Shinhan Financial and Nu Holdings

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

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

Diversification Opportunities for Shinhan Financial and Nu Holdings

0.68

Correlation Coefficient

Shinhan Financial  Nu Holdings

Poor diversification

The 3 months correlation between Shinhan and Nu Holdings is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Shinhan Financial Group and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings and Shinhan Financial 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 Shinhan Financial Group 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 Shinhan Financial i.e., Shinhan Financial and Nu Holdings go up and down completely randomly.

Pair Corralation between Shinhan Financial and Nu Holdings

Considering the 90-day investment horizon Shinhan Financial is expected to generate 3.02 times less return on investment than Nu Holdings. But when comparing it to its historical volatility, Shinhan Financial Group is 1.26 times less risky than Nu Holdings. It trades about 0.04 of its potential returns per unit of risk. Nu Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  356.00  in Nu Holdings on September 23, 2024 and sell it today you would earn a total of  682.00  from holding Nu Holdings or generate 191.57% return on investment over 90 days.

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

Shinhan Financial Group  vs.  Nu Holdings

Shinhan Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shinhan Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile 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 Shinhan Financial and Nu Holdings

The main advantage of trading using opposite Shinhan Financial and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shinhan Financial 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 Shinhan Financial Group 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.