Correlation Between Nu Holdings and First Horizon

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

By analyzing existing cross correlation between Nu Holdings and First Horizon National, you can compare the effects of market volatilities on Nu Holdings and First Horizon 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 First Horizon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Holdings and First Horizon.

Diversification Opportunities for Nu Holdings and First Horizon

0.73

Correlation Coefficient

Nu Holdings  First Horizon

Poor diversification

The 3 months correlation between Nu Holdings and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and First Horizon National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Horizon National 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 First Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Horizon National has no effect on the direction of Nu Holdings i.e., Nu Holdings and First Horizon go up and down completely randomly.

Pair Corralation between Nu Holdings and First Horizon

Allowing for the 90-day total investment horizon Nu Holdings is expected to under-perform the First Horizon. In addition to that, Nu Holdings is 1.33 times more volatile than First Horizon National. It trades about -0.05 of its total potential returns per unit of risk. First Horizon National is currently generating about 0.13 per unit of volatility. If you would invest  1,515  in First Horizon National on February 6, 2024 and sell it today you would earn a total of  65.00  from holding First Horizon National or generate 4.29% return on investment over 90 days.

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

Nu Holdings  vs.  First Horizon National

Nu Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nu Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Nu Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Horizon National

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon National are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, First Horizon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nu Holdings and First Horizon

The main advantage of trading using opposite Nu Holdings and First Horizon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nu Holdings position performs unexpectedly, First Horizon 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 First Horizon will offset losses from the drop in First Horizon's long position.

The idea behind Nu Holdings and First Horizon National 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.