Correlation Between National Retail and Hercules Capital

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

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

Diversification Opportunities for National Retail and Hercules Capital

-0.07

Correlation Coefficient

National Retail  Hercules Capital

Good diversification

The 3 months correlation between National and Hercules is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and National Retail 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 National Retail Properties 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 National Retail i.e., National Retail and Hercules Capital go up and down completely randomly.

Pair Corralation between National Retail and Hercules Capital

Assuming the 90 days trading horizon National Retail is expected to generate 24.14 times less return on investment than Hercules Capital. In addition to that, National Retail is 1.12 times more volatile than Hercules Capital. It trades about 0.01 of its total potential returns per unit of risk. Hercules Capital is currently generating about 0.3 per unit of volatility. If you would invest  1,704  in Hercules Capital on October 6, 2024 and sell it today you would earn a total of  306.00  from holding Hercules Capital or generate 17.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

National Retail Properties  vs.  Hercules Capital

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hercules Capital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Hercules Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Retail and Hercules Capital

The main advantage of trading using opposite National Retail and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Retail 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 National Retail Properties 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.