Correlation Between Horizon Technology and Hercules Capital

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

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

Diversification Opportunities for Horizon Technology and Hercules Capital

0.79

Correlation Coefficient

Horizon Technology  Hercules Capital

Poor diversification

The 3 months correlation between Horizon and Hercules is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Technology Finance and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Horizon Technology 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 Horizon Technology Finance 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 Horizon Technology i.e., Horizon Technology and Hercules Capital go up and down completely randomly.

Pair Corralation between Horizon Technology and Hercules Capital

Given the investment horizon of 90 days Horizon Technology Finance is expected to generate 0.77 times more return on investment than Hercules Capital. However, Horizon Technology Finance is 1.29 times less risky than Hercules Capital. It trades about 0.38 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.09 per unit of risk. If you would invest  915.00  in Horizon Technology Finance on November 28, 2024 and sell it today you would earn a total of  57.00  from holding Horizon Technology Finance or generate 6.23% return on investment over 90 days.

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

Horizon Technology Finance  vs.  Hercules Capital

Horizon Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Technology Finance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Horizon Technology may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Hercules Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Hercules Capital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Horizon Technology and Hercules Capital

The main advantage of trading using opposite Horizon Technology and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Technology 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 Horizon Technology Finance 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.