Correlation Between Nu Holdings and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Nu Holdings and Merchants Bancorp 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 Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nu Holdings and Merchants Bancorp, you can compare the effects of market volatilities on Nu Holdings and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Holdings and Merchants Bancorp.
Diversification Opportunities for Nu Holdings and Merchants Bancorp
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Nu Holdings and Merchants is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Nu Holdings i.e., Nu Holdings and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Nu Holdings and Merchants Bancorp
Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 5.08 times more return on investment than Merchants Bancorp. However, Nu Holdings is 5.08 times more volatile than Merchants Bancorp. It trades about 0.07 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.18 per unit of risk. If you would invest 815.00 in Nu Holdings on September 14, 2024 and sell it today you would earn a total of 379.00 from holding Nu Holdings or generate 46.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Nu Holdings vs. Merchants Bancorp
Performance |
| Timeline |
| Nu Holdings |
| Merchants Bancorp |
Nu Holdings and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nu Holdings and Merchants Bancorp
The main advantage of trading using opposite Nu Holdings and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu Holdings position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp'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 |
| Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Capital One Financial | Merchants Bancorp 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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