Correlation Between Hercules Capital and Paragon Banking

Can any of the company-specific risk be diversified away by investing in both Hercules Capital and Paragon Banking 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 Hercules Capital and Paragon Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hercules Capital and Paragon Banking Group, you can compare the effects of market volatilities on Hercules Capital and Paragon Banking 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 Hercules Capital with a short position of Paragon Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hercules Capital and Paragon Banking.

Diversification Opportunities for Hercules Capital and Paragon Banking

0.15

Correlation Coefficient

Hercules Capital  Paragon Banking

Average diversification

The 3 months correlation between Hercules and Paragon is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Paragon Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paragon Banking Group and Hercules Capital 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 Hercules Capital are associated (or correlated) with Paragon Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paragon Banking Group has no effect on the direction of Hercules Capital i.e., Hercules Capital and Paragon Banking go up and down completely randomly.

Pair Corralation between Hercules Capital and Paragon Banking

Assuming the 90 days horizon Hercules Capital is expected to generate 0.93 times more return on investment than Paragon Banking. However, Hercules Capital is 1.08 times less risky than Paragon Banking. It trades about 0.07 of its potential returns per unit of risk. Paragon Banking Group is currently generating about 0.05 per unit of risk. If you would invest  1,028  in Hercules Capital on September 22, 2024 and sell it today you would earn a total of  779.00  from holding Hercules Capital or generate 75.78% return on investment over 90 days.

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

Hercules Capital  vs.  Paragon Banking Group

Hercules Capital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hercules Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Paragon Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paragon Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Paragon Banking is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hercules Capital and Paragon Banking

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

The idea behind Hercules Capital and Paragon Banking 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.