Correlation Between Nu Holdings and FB Financial

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

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

Diversification Opportunities for Nu Holdings and FB Financial

0.18

Correlation Coefficient

Nu Holdings  FB Financial

Average diversification

The 3 months correlation between Nu Holdings and FBK is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Nu Holdings i.e., Nu Holdings and FB Financial go up and down completely randomly.

Pair Corralation between Nu Holdings and FB Financial

Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 1.3 times more return on investment than FB Financial. However, Nu Holdings is 1.3 times more volatile than FB Financial Corp. It trades about 0.07 of its potential returns per unit of risk. FB Financial Corp is currently generating about -0.04 per unit of risk. If you would invest  1,081  in Nu Holdings on March 7, 2025 and sell it today you would earn a total of  113.00  from holding Nu Holdings or generate 10.45% return on investment over 90 days.

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

Nu Holdings  vs.  FB Financial Corp

Nu Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nu Holdings are ranked lower than 5 (%) 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.

FB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Nu Holdings and FB Financial

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

The idea behind Nu Holdings and FB Financial Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.