Correlation Between Nu Holdings and Banco Santander

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

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

Diversification Opportunities for Nu Holdings and Banco Santander

0.6

Correlation Coefficient

Nu Holdings  Banco Santander

Poor diversification

The 3 months correlation between Nu Holdings and Banco is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and Banco Santander SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Santander SA 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 Banco Santander. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Santander SA has no effect on the direction of Nu Holdings i.e., Nu Holdings and Banco Santander go up and down completely randomly.

Pair Corralation between Nu Holdings and Banco Santander

Allowing for the 90-day total investment horizon Nu Holdings is expected to under-perform the Banco Santander. In addition to that, Nu Holdings is 1.15 times more volatile than Banco Santander SA. It trades about -0.05 of its total potential returns per unit of risk. Banco Santander SA is currently generating about 0.02 per unit of volatility. If you would invest  480.00  in Banco Santander SA on February 5, 2024 and sell it today you would earn a total of  3.00  from holding Banco Santander SA or generate 0.63% 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.  Banco Santander SA

Nu Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nu Holdings are ranked lower than 15 (%) 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.

Banco Santander SA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Santander SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Banco Santander displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nu Holdings and Banco Santander

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

The idea behind Nu Holdings and Banco Santander SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.