Correlation Between Hercules Capital and Main Street

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

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

Diversification Opportunities for Hercules Capital and Main Street

0.92

Correlation Coefficient

Hercules Capital  Main Street

Almost no diversification

The 3 months correlation between Hercules and Main is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Main Street Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Capital 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Capital has no effect on the direction of Hercules Capital i.e., Hercules Capital and Main Street go up and down completely randomly.

Pair Corralation between Hercules Capital and Main Street

Given the investment horizon of 90 days Hercules Capital is expected to under-perform the Main Street. In addition to that, Hercules Capital is 1.01 times more volatile than Main Street Capital. It trades about -0.02 of its total potential returns per unit of risk. Main Street Capital is currently generating about 0.0 per unit of volatility. If you would invest  5,699  in Main Street Capital on December 29, 2024 and sell it today you would lose (33.00) from holding Main Street Capital or give up 0.58% of portfolio value over 90 days.

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

Hercules Capital  vs.  Main Street Capital

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.

Main Street Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Main Street Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Main Street is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hercules Capital and Main Street

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

The idea behind Hercules Capital and Main Street 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.