Correlation Between Prosperity Bancshares and Nu Holdings

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Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares 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 Prosperity Bancshares and Nu Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Nu Holdings, you can compare the effects of market volatilities on Prosperity Bancshares 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 Prosperity Bancshares with a short position of Nu Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Nu Holdings.

Diversification Opportunities for Prosperity Bancshares and Nu Holdings

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Prosperity and Nu Holdings is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings and Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares i.e., Prosperity Bancshares and Nu Holdings go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Nu Holdings

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 0.81 times more return on investment than Nu Holdings. However, Prosperity Bancshares is 1.24 times less risky than Nu Holdings. It trades about 0.28 of its potential returns per unit of risk. Nu Holdings is currently generating about -0.21 per unit of risk. If you would invest  7,325  in Prosperity Bancshares on August 30, 2024 and sell it today you would earn a total of  1,092  from holding Prosperity Bancshares or generate 14.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Prosperity Bancshares  vs.  Nu Holdings

 Performance 
       Timeline  
Prosperity Bancshares 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Prosperity Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.
Nu Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Prosperity Bancshares and Nu Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Prosperity Bancshares and Nu Holdings

The main advantage of trading using opposite Prosperity Bancshares and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares 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 Prosperity Bancshares 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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