Correlation Between Barclays PLC and Nu Holdings

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

By analyzing existing cross correlation between Barclays PLC ADR and Nu Holdings, you can compare the effects of market volatilities on Barclays PLC 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 Barclays PLC with a short position of Nu Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays PLC and Nu Holdings.

Diversification Opportunities for Barclays PLC and Nu Holdings

0.72

Correlation Coefficient

Barclays PLC  Nu Holdings

Poor diversification

The 3 months correlation between Barclays and Nu Holdings is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC ADR and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings and Barclays PLC 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 Barclays PLC ADR 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 Barclays PLC i.e., Barclays PLC and Nu Holdings go up and down completely randomly.

Pair Corralation between Barclays PLC and Nu Holdings

Considering the 90-day investment horizon Barclays PLC is expected to generate 2.59 times less return on investment than Nu Holdings. But when comparing it to its historical volatility, Barclays PLC ADR is 1.66 times less risky than Nu Holdings. It trades about 0.05 of its potential returns per unit of risk. Nu Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Nu Holdings on February 5, 2024 and sell it today you would earn a total of  733.00  from holding Nu Holdings or generate 168.51% return on investment over 90 days.

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

Barclays PLC ADR  vs.  Nu Holdings

Barclays PLC ADR

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Barclays PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Barclays PLC and Nu Holdings

The main advantage of trading using opposite Barclays PLC and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC 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 Barclays PLC ADR 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 Transaction History module to view history of all your transactions and understand their impact on performance.