Correlation Between Reinsurance Group and Hercules Capital

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

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

Diversification Opportunities for Reinsurance Group and Hercules Capital

-0.43

Correlation Coefficient

Reinsurance Group  Hercules Capital

Very good diversification

The 3 months correlation between Reinsurance and Hercules is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Reinsurance Group 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 Reinsurance Group of 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 Reinsurance Group i.e., Reinsurance Group and Hercules Capital go up and down completely randomly.

Pair Corralation between Reinsurance Group and Hercules Capital

Considering the 90-day investment horizon Reinsurance Group is expected to generate 1.56 times less return on investment than Hercules Capital. But when comparing it to its historical volatility, Reinsurance Group of is 1.89 times less risky than Hercules Capital. It trades about 0.07 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,390  in Hercules Capital on September 19, 2024 and sell it today you would earn a total of  112.00  from holding Hercules Capital or generate 4.69% return on investment over 90 days.

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

Reinsurance Group of  vs.  Hercules Capital

Reinsurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Reinsurance Group and Hercules Capital

The main advantage of trading using opposite Reinsurance Group and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group 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 Reinsurance Group of 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.