Correlation Between Nu Holdings and Mizuho Financial

Can any of the company-specific risk be diversified away by investing in both Nu Holdings and Mizuho 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 Mizuho 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 Mizuho Financial Group, you can compare the effects of market volatilities on Nu Holdings and Mizuho 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 Mizuho Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nu Holdings and Mizuho Financial.

Diversification Opportunities for Nu Holdings and Mizuho Financial

0.77

Correlation Coefficient

Nu Holdings  Mizuho Financial

Poor diversification

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

Pair Corralation between Nu Holdings and Mizuho Financial

Allowing for the 90-day total investment horizon Nu Holdings is expected to under-perform the Mizuho Financial. In addition to that, Nu Holdings is 1.06 times more volatile than Mizuho Financial Group. It trades about -0.2 of its total potential returns per unit of risk. Mizuho Financial Group is currently generating about 0.0 per unit of volatility. If you would invest  386.00  in Mizuho Financial Group on January 30, 2024 and sell it today you would lose (1.00) from holding Mizuho Financial Group or give up 0.26% of portfolio value over 90 days.

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

Nu Holdings  vs.  Mizuho Financial Group

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 fragile basic indicators, Nu Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Mizuho Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuho Financial Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Mizuho Financial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Nu Holdings and Mizuho Financial

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

The idea behind Nu Holdings and Mizuho Financial Group 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.