Correlation Between Argo Group and Hercules Capital

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

By analyzing existing cross correlation between Argo Group 65 and Hercules Capital, you can compare the effects of market volatilities on Argo Group 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 Argo Group with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argo Group and Hercules Capital.

Diversification Opportunities for Argo Group and Hercules Capital

0.3

Correlation Coefficient

Argo Group  Hercules Capital

Weak diversification

The 3 months correlation between Argo and Hercules is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Argo Group 65 and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Argo Group 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 Argo Group 65 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 Argo Group i.e., Argo Group and Hercules Capital go up and down completely randomly.

Pair Corralation between Argo Group and Hercules Capital

Given the investment horizon of 90 days Argo Group 65 is expected to generate 0.55 times more return on investment than Hercules Capital. However, Argo Group 65 is 1.8 times less risky than Hercules Capital. It trades about 0.34 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.19 per unit of risk. If you would invest  2,112  in Argo Group 65 on December 10, 2024 and sell it today you would earn a total of  53.00  from holding Argo Group 65 or generate 2.51% return on investment over 90 days.

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

Argo Group 65  vs.  Hercules Capital

Argo Group 65

Risk-Adjusted Performance

Very Weak

Over the last 90 days Argo Group 65 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Argo Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hercules Capital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hercules Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Argo Group and Hercules Capital

The main advantage of trading using opposite Argo Group and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Argo Group 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 Argo Group 65 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.