Correlation Between Hercules Capital and Aquagold International

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

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

Diversification Opportunities for Hercules Capital and Aquagold International

0.24

Correlation Coefficient

Hercules Capital  Aquagold International

Modest diversification

The 3 months correlation between Hercules and Aquagold is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Aquagold International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquagold International and Hercules Capital 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 Hercules Capital are associated (or correlated) with Aquagold International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquagold International has no effect on the direction of Hercules Capital i.e., Hercules Capital and Aquagold International go up and down completely randomly.

Pair Corralation between Hercules Capital and Aquagold International

Given the investment horizon of 90 days Hercules Capital is expected to generate 67.38 times less return on investment than Aquagold International. But when comparing it to its historical volatility, Hercules Capital is 37.48 times less risky than Aquagold International. It trades about 0.03 of its potential returns per unit of risk. Aquagold International is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Aquagold International on September 26, 2024 and sell it today you would lose (16.96) from holding Aquagold International or give up 99.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Hercules Capital  vs.  Aquagold International

Hercules Capital

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Hercules Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Aquagold International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquagold International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Hercules Capital and Aquagold International

The main advantage of trading using opposite Hercules Capital and Aquagold International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hercules Capital position performs unexpectedly, Aquagold International 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 Aquagold International will offset losses from the drop in Aquagold International's long position.

The idea behind Hercules Capital and Aquagold International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..