Correlation Between Hercules Capital and Cornerstone Strategic

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

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

Diversification Opportunities for Hercules Capital and Cornerstone Strategic

0.65

Correlation Coefficient

Hercules Capital  Cornerstone Strategic

Poor diversification

The 3 months correlation between Hercules and Cornerstone is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Cornerstone Strategic Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornerstone Strategic 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 Cornerstone Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornerstone Strategic has no effect on the direction of Hercules Capital i.e., Hercules Capital and Cornerstone Strategic go up and down completely randomly.

Pair Corralation between Hercules Capital and Cornerstone Strategic

Given the investment horizon of 90 days Hercules Capital is expected to generate 0.76 times more return on investment than Cornerstone Strategic. However, Hercules Capital is 1.31 times less risky than Cornerstone Strategic. It trades about -0.02 of its potential returns per unit of risk. Cornerstone Strategic Return is currently generating about -0.11 per unit of risk. If you would invest  1,964  in Hercules Capital on December 30, 2024 and sell it today you would lose (38.00) from holding Hercules Capital or give up 1.93% of portfolio value over 90 days.

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

Hercules Capital  vs.  Cornerstone Strategic Return

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. In spite of rather sound technical and fundamental indicators, Hercules Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Cornerstone Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cornerstone Strategic Return has generated negative risk-adjusted returns adding no value to fund investors. Despite unfluctuating performance in the last few months, the Fund's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the mutual fund stockholders.

Pair Trading with Hercules Capital and Cornerstone Strategic

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

The idea behind Hercules Capital and Cornerstone Strategic Return 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.