Correlation Between Wells Fargo and Nu Holdings
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Nu Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Nu Holdings, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Nu Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Nu Holdings.
Diversification Opportunities for Wells Fargo and Nu Holdings
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Nu Holdings is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Nu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nu Holdings and Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Nu Holdings go up and down completely randomly.
Pair Corralation between Wells Fargo and Nu Holdings
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.36 times less return on investment than Nu Holdings. But when comparing it to its historical volatility, Wells Fargo is 1.32 times less risky than Nu Holdings. It trades about 0.11 of its potential returns per unit of risk. Nu Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,012 in Nu Holdings on March 9, 2025 and sell it today you would earn a total of 203.00 from holding Nu Holdings or generate 20.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Nu Holdings
Performance |
| Timeline |
| Wells Fargo |
| Nu Holdings |
Wells Fargo and Nu Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Nu Holdings
The main advantage of trading using opposite Wells Fargo and Nu Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Thrivent High Yield | Wells Fargo vs. Morningstar Unconstrained Allocation | Wells Fargo vs. Via Renewables | Wells Fargo vs. T Rowe Price |
| Nu Holdings vs. Western Alliance Bancorporation | Nu Holdings vs. KeyCorp | Nu Holdings vs. Truist Financial Corp | Nu Holdings vs. Zions Bancorporation |
Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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