Correlation Between Perdoceo Education and Hercules Capital

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

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

Diversification Opportunities for Perdoceo Education and Hercules Capital

0.55

Correlation Coefficient

Perdoceo Education  Hercules Capital

Very weak diversification

The 3 months correlation between Perdoceo and Hercules is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Perdoceo Education and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Perdoceo Education 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 Perdoceo Education 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 Perdoceo Education i.e., Perdoceo Education and Hercules Capital go up and down completely randomly.

Pair Corralation between Perdoceo Education and Hercules Capital

Assuming the 90 days horizon Perdoceo Education is expected to generate 1.95 times more return on investment than Hercules Capital. However, Perdoceo Education is 1.95 times more volatile than Hercules Capital. It trades about 0.19 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.11 per unit of risk. If you would invest  1,891  in Perdoceo Education on October 4, 2024 and sell it today you would earn a total of  609.00  from holding Perdoceo Education or generate 32.21% return on investment over 90 days.

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

Perdoceo Education  vs.  Hercules Capital

Perdoceo Education

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perdoceo Education are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Perdoceo Education reported solid returns over the last few months and may actually be approaching a breakup point.

Hercules Capital

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Perdoceo Education and Hercules Capital

The main advantage of trading using opposite Perdoceo Education and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perdoceo Education 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 Perdoceo Education 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.