Correlation Between Hercules Capital and Argo Group

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

By analyzing existing cross correlation between Hercules Capital and Argo Group 65, you can compare the effects of market volatilities on Hercules Capital and Argo Group 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 Argo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hercules Capital and Argo Group.

Diversification Opportunities for Hercules Capital and Argo Group

-0.2

Correlation Coefficient

Hercules Capital  Argo Group

Good diversification

The 3 months correlation between Hercules and Argo is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Argo Group 65 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group 65 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 Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group 65 has no effect on the direction of Hercules Capital i.e., Hercules Capital and Argo Group go up and down completely randomly.

Pair Corralation between Hercules Capital and Argo Group

Given the investment horizon of 90 days Hercules Capital is expected to generate 1.48 times less return on investment than Argo Group. In addition to that, Hercules Capital is 1.11 times more volatile than Argo Group 65. It trades about 0.03 of its total potential returns per unit of risk. Argo Group 65 is currently generating about 0.05 per unit of volatility. If you would invest  1,694  in Argo Group 65 on September 20, 2024 and sell it today you would earn a total of  468.00  from holding Argo Group 65 or generate 27.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.58%
Values	Daily Returns

Hercules Capital  vs.  Argo Group 65

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 current stock price disturbance, may contribute to short-term losses for the investors.

Argo Group 65

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Argo Group 65 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Argo Group is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hercules Capital and Argo Group

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

The idea behind Hercules Capital and Argo Group 65 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.