Correlation Between Nu Holdings and Southern California

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

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

Diversification Opportunities for Nu Holdings and Southern California

0.77

Correlation Coefficient

Nu Holdings  Southern California

Poor diversification

The 3 months correlation between Nu Holdings and Southern is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and Southern California Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California 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 Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California has no effect on the direction of Nu Holdings i.e., Nu Holdings and Southern California go up and down completely randomly.

Pair Corralation between Nu Holdings and Southern California

Allowing for the 90-day total investment horizon Nu Holdings is expected to under-perform the Southern California. In addition to that, Nu Holdings is 1.56 times more volatile than Southern California Bancorp. It trades about -0.01 of its total potential returns per unit of risk. Southern California Bancorp is currently generating about 0.01 per unit of volatility. If you would invest  1,452  in Southern California Bancorp on May 6, 2025 and sell it today you would earn a total of  8.00  from holding Southern California Bancorp or generate 0.55% 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.  Southern California Bancorp

Nu Holdings

Risk-Adjusted Performance

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 comparatively stable basic indicators, Nu Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Southern California

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern California Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Southern California is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Nu Holdings and Southern California

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

The idea behind Nu Holdings and Southern California Bancorp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.