Correlation Between Hercules Capital and Casio Computer

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

By analyzing existing cross correlation between Hercules Capital and Casio Computer CoLtd, you can compare the effects of market volatilities on Hercules Capital and Casio Computer 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 Casio Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hercules Capital and Casio Computer.

Diversification Opportunities for Hercules Capital and Casio Computer

0.5

Correlation Coefficient

Hercules Capital  Casio Computer

Very weak diversification

The 3 months correlation between Hercules and Casio is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Casio Computer CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Casio Computer CoLtd 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 Casio Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Casio Computer CoLtd has no effect on the direction of Hercules Capital i.e., Hercules Capital and Casio Computer go up and down completely randomly.

Pair Corralation between Hercules Capital and Casio Computer

Assuming the 90 days horizon Hercules Capital is expected to generate 1.75 times more return on investment than Casio Computer. However, Hercules Capital is 1.75 times more volatile than Casio Computer CoLtd. It trades about -0.01 of its potential returns per unit of risk. Casio Computer CoLtd is currently generating about -0.06 per unit of risk. If you would invest  1,794  in Hercules Capital on December 21, 2024 and sell it today you would lose (42.00) from holding Hercules Capital or give up 2.34% of portfolio value over 90 days.

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

Hercules Capital  vs.  Casio Computer CoLtd

Hercules Capital

Risk-Adjusted Performance

Very Weak

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

Casio Computer CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Casio Computer CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Casio Computer 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 Casio Computer

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

The idea behind Hercules Capital and Casio Computer CoLtd 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.