Correlation Between SECURITAS and Hercules Capital

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

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

Diversification Opportunities for SECURITAS and Hercules Capital

0.12

Correlation Coefficient

SECURITAS  Hercules Capital

Average diversification

The 3 months correlation between SECURITAS and Hercules is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding SECURITAS B and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and SECURITAS 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 SECURITAS B 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 SECURITAS i.e., SECURITAS and Hercules Capital go up and down completely randomly.

Pair Corralation between SECURITAS and Hercules Capital

Assuming the 90 days trading horizon SECURITAS B is expected to under-perform the Hercules Capital. But the stock apears to be less risky and, when comparing its historical volatility, SECURITAS B is 2.64 times less risky than Hercules Capital. The stock trades about -0.06 of its potential returns per unit of risk. The Hercules Capital is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,834  in Hercules Capital on October 22, 2024 and sell it today you would earn a total of  182.00  from holding Hercules Capital or generate 9.92% return on investment over 90 days.

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

SECURITAS B   vs.  Hercules Capital

SECURITAS B

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SECURITAS B are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SECURITAS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hercules Capital

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hercules Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with SECURITAS and Hercules Capital

The main advantage of trading using opposite SECURITAS and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SECURITAS 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 SECURITAS B 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.