Correlation Between Oxford Square and Hercules Capital

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

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

Diversification Opportunities for Oxford Square and Hercules Capital

0.36

Correlation Coefficient

Oxford Square  Hercules Capital

Weak diversification

The 3 months correlation between Oxford and Hercules is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Oxford Square Capital and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Oxford Square 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 Oxford Square Capital 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 Oxford Square i.e., Oxford Square and Hercules Capital go up and down completely randomly.

Pair Corralation between Oxford Square and Hercules Capital

Given the investment horizon of 90 days Oxford Square Capital is expected to generate 0.79 times more return on investment than Hercules Capital. However, Oxford Square Capital is 1.27 times less risky than Hercules Capital. It trades about 0.15 of its potential returns per unit of risk. Hercules Capital is currently generating about -0.02 per unit of risk. If you would invest  232.00  in Oxford Square Capital on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Oxford Square Capital or generate 10.34% return on investment over 90 days.

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

Oxford Square Capital  vs.  Hercules Capital

Oxford Square Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oxford Square Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Oxford Square may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

Pair Trading with Oxford Square and Hercules Capital

The main advantage of trading using opposite Oxford Square and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oxford Square 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 Oxford Square Capital 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.