Correlation Between Hercules Capital and Vanguard Funds

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

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

Diversification Opportunities for Hercules Capital and Vanguard Funds

0.66

Correlation Coefficient

Hercules Capital  Vanguard Funds

Poor diversification

The 3 months correlation between Hercules and Vanguard is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of Hercules Capital i.e., Hercules Capital and Vanguard Funds go up and down completely randomly.

Pair Corralation between Hercules Capital and Vanguard Funds

Assuming the 90 days horizon Hercules Capital is expected to generate 2.25 times more return on investment than Vanguard Funds. However, Hercules Capital is 2.25 times more volatile than Vanguard Funds Public. It trades about 0.08 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.11 per unit of risk. If you would invest  1,008  in Hercules Capital on October 5, 2024 and sell it today you would earn a total of  974.00  from holding Hercules Capital or generate 96.63% return on investment over 90 days.

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

Hercules Capital  vs.  Vanguard Funds Public

Hercules Capital

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Hercules Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Hercules Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Vanguard Funds Public

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Vanguard Funds may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hercules Capital and Vanguard Funds

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

The idea behind Hercules Capital and Vanguard Funds Public 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.