Correlation Between Citigroup and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Hercules Capital, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Hercules Capital.
Diversification Opportunities for Citigroup and Hercules Capital
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Citigroup and Hercules is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Hercules Capital go up and down completely randomly.
Pair Corralation between Citigroup and Hercules Capital
Taking into account the 90-day investment horizon Citigroup is expected to under-perform the Hercules Capital. In addition to that, Citigroup is 1.07 times more volatile than Hercules Capital. It trades about -0.03 of its total potential returns per unit of risk. Hercules Capital is currently generating about 0.01 per unit of volatility. If you would invest 1,806 in Hercules Capital on September 23, 2024 and sell it today you would earn a total of 1.00 from holding Hercules Capital or generate 0.06% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Citigroup vs. Hercules Capital
Performance |
Timeline |
Citigroup |
Hercules Capital |
Citigroup and Hercules Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Citigroup and Hercules Capital
The main advantage of trading using opposite Citigroup and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.Citigroup vs. Toronto Dominion Bank | Citigroup vs. Nu Holdings | Citigroup vs. Canadian Imperial Bank | Citigroup vs. Bank of Montreal |
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Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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