Correlation Between Nu Holdings and China Construction
Can any of the company-specific risk be diversified away by investing in both Nu Holdings and China Construction 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 China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nu Holdings and China Construction Bank, you can compare the effects of market volatilities on Nu Holdings and China Construction 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 China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Holdings and China Construction.
Diversification Opportunities for Nu Holdings and China Construction
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Nu Holdings and China is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank 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 China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of Nu Holdings i.e., Nu Holdings and China Construction go up and down completely randomly.
Pair Corralation between Nu Holdings and China Construction
Allowing for the 90-day total investment horizon Nu Holdings is expected to under-perform the China Construction. But the stock apears to be less risky and, when comparing its historical volatility, Nu Holdings is 1.32 times less risky than China Construction. The stock trades about -0.12 of its potential returns per unit of risk. The China Construction Bank is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 75.00 in China Construction Bank on August 27, 2024 and sell it today you would lose (4.00) from holding China Construction Bank or give up 5.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nu Holdings vs. China Construction Bank
Performance |
| Timeline |
| Nu Holdings |
| China Construction Bank |
Nu Holdings and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nu Holdings and China Construction
The main advantage of trading using opposite Nu Holdings and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu Holdings position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.| Nu Holdings vs. Banco Santander Brasil | Nu Holdings vs. CrossFirst Bankshares | Nu Holdings vs. Banco Bradesco SA | Nu Holdings vs. CF Bankshares |
| China Construction vs. Svenska Handelsbanken PK | China Construction vs. Industrial and Commercial | China Construction vs. Bank of America | China Construction vs. Bank of America |
Check out your portfolio center.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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