Correlation Between Truist Financial and Nu Holdings

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

Diversification Opportunities for Truist Financial and Nu Holdings

TruistNu HoldingsDiversified AwayTruistNu HoldingsDiversified Away100%
0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Truist and Nu Holdings is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Truist Financial and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings and Truist 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 Truist Financial 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 Truist Financial i.e., Truist Financial and Nu Holdings go up and down completely randomly.

Pair Corralation between Truist Financial and Nu Holdings

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.17 times more return on investment than Nu Holdings. However, Truist Financial is 5.78 times less risky than Nu Holdings. It trades about -0.02 of its potential returns per unit of risk. Nu Holdings is currently generating about -0.11 per unit of risk. If you would invest  2,225  in Truist Financial on November 25, 2024 and sell it today you would lose (9.00) from holding Truist Financial or give up 0.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Truist Financial  vs.  Nu Holdings

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -30-25-20-15-10-50
JavaScript chart by amCharts 3.21.15TFC-PO NU
       Timeline  
Truist Financial 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb20.52121.52222.523
Nu Holdings 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Nu Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.51111.51212.51313.51414.5

Truist Financial and Nu Holdings Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.69-1.26-0.83-0.4-0.01420.350.781.211.642.07 0.050.100.150.200.250.300.35
JavaScript chart by amCharts 3.21.15TFC-PO NU
       Returns  

Pair Trading with Truist Financial and Nu Holdings

The main advantage of trading using opposite Truist Financial and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist 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 Truist Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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