Correlation Between Nu Holdings and Sierra Bancorp

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

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

Diversification Opportunities for Nu Holdings and Sierra Bancorp

-0.09

Correlation Coefficient

Nu Holdings  Sierra Bancorp

Good diversification

The 3 months correlation between Nu Holdings and Sierra is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nu Holdings and Sierra Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sierra Bancorp 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 Sierra Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sierra Bancorp has no effect on the direction of Nu Holdings i.e., Nu Holdings and Sierra Bancorp go up and down completely randomly.

Pair Corralation between Nu Holdings and Sierra Bancorp

Allowing for the 90-day total investment horizon Nu Holdings is expected to generate 1.94 times more return on investment than Sierra Bancorp. However, Nu Holdings is 1.94 times more volatile than Sierra Bancorp. It trades about 0.07 of its potential returns per unit of risk. Sierra Bancorp is currently generating about 0.02 per unit of risk. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nu Holdings  vs.  Sierra Bancorp

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.

Sierra Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Sierra Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nu Holdings and Sierra Bancorp

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

The idea behind Nu Holdings and Sierra 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.