Correlation Between Hercules Capital and DBA Sempra

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

By analyzing existing cross correlation between Hercules Capital and DBA Sempra 5750, you can compare the effects of market volatilities on Hercules Capital and DBA Sempra 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 DBA Sempra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hercules Capital and DBA Sempra.

Diversification Opportunities for Hercules Capital and DBA Sempra

0.46

Correlation Coefficient

Hercules Capital  DBA Sempra

Very weak diversification

The 3 months correlation between Hercules and DBA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and DBA Sempra 5750 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBA Sempra 5750 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 DBA Sempra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBA Sempra 5750 has no effect on the direction of Hercules Capital i.e., Hercules Capital and DBA Sempra go up and down completely randomly.

Pair Corralation between Hercules Capital and DBA Sempra

Given the investment horizon of 90 days Hercules Capital is expected to generate 0.46 times more return on investment than DBA Sempra. However, Hercules Capital is 2.16 times less risky than DBA Sempra. It trades about -0.13 of its potential returns per unit of risk. DBA Sempra 5750 is currently generating about -0.14 per unit of risk. If you would invest  2,538  in Hercules Capital on October 5, 2024 and sell it today you would lose (21.00) from holding Hercules Capital or give up 0.83% of portfolio value over 90 days.

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

Hercules Capital  vs.  DBA Sempra 5750

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.

DBA Sempra 5750

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DBA Sempra 5750 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, DBA Sempra is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hercules Capital and DBA Sempra

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

The idea behind Hercules Capital and DBA Sempra 5750 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.