Correlation Between Associated Capital and Hercules Capital

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

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

Diversification Opportunities for Associated Capital and Hercules Capital

0.52

Correlation Coefficient

Associated Capital  Hercules Capital

Very weak diversification

The 3 months correlation between Associated and Hercules is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Associated 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 Associated Capital Group are associated (or correlated) with Hercules Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hercules Capital has no effect on the direction of Associated Capital i.e., Associated Capital and Hercules Capital go up and down completely randomly.

Pair Corralation between Associated Capital and Hercules Capital

Allowing for the 90-day total investment horizon Associated Capital Group is expected to generate 1.9 times more return on investment than Hercules Capital. However, Associated Capital is 1.9 times more volatile than Hercules Capital. It trades about 0.1 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.05 per unit of risk. If you would invest  3,130  in Associated Capital Group on September 4, 2024 and sell it today you would earn a total of  382.00  from holding Associated Capital Group or generate 12.2% return on investment over 90 days.

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

Associated Capital Group  vs.  Hercules Capital

Associated Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Capital Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental indicators, Associated Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hercules Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hercules Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Associated Capital and Hercules Capital

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

The idea behind Associated Capital Group and Hercules Capital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.