Correlation Between Carlyle Secured and Hercules Capital

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

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

Diversification Opportunities for Carlyle Secured and Hercules Capital

0.66

Correlation Coefficient

Carlyle Secured  Hercules Capital

Poor diversification

The 3 months correlation between Carlyle and Hercules is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Secured Lending and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Carlyle Secured 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 Carlyle Secured Lending 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 Carlyle Secured i.e., Carlyle Secured and Hercules Capital go up and down completely randomly.

Pair Corralation between Carlyle Secured and Hercules Capital

Given the investment horizon of 90 days Carlyle Secured Lending is expected to under-perform the Hercules Capital. But the stock apears to be less risky and, when comparing its historical volatility, Carlyle Secured Lending is 1.14 times less risky than Hercules Capital. The stock trades about -0.07 of its potential returns per unit of risk. The Hercules Capital is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,964  in Hercules Capital on December 29, 2024 and sell it today you would lose (38.00) from holding Hercules Capital or give up 1.93% of portfolio value over 90 days.

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

Carlyle Secured Lending  vs.  Hercules Capital

Carlyle Secured Lending

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Secured Lending has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Carlyle Secured is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Hercules Capital

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Carlyle Secured and Hercules Capital

The main advantage of trading using opposite Carlyle Secured and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle Secured 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 Carlyle Secured Lending 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.