Correlation Between De Grey and Hercules Capital

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

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

Diversification Opportunities for De Grey and Hercules Capital

0.37

Correlation Coefficient

De Grey  Hercules Capital

Weak diversification

The 3 months correlation between DGD and Hercules is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Hercules Capital go up and down completely randomly.

Pair Corralation between De Grey and Hercules Capital

Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.09 times more return on investment than Hercules Capital. However, De Grey is 1.09 times more volatile than Hercules Capital. It trades about 0.12 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.0 per unit of risk. If you would invest  104.00  in De Grey Mining on December 22, 2024 and sell it today you would earn a total of  16.00  from holding De Grey Mining or generate 15.38% return on investment over 90 days.

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

De Grey Mining  vs.  Hercules Capital

De Grey Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, Hercules Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with De Grey and Hercules Capital

The main advantage of trading using opposite De Grey and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.