Correlation Between BlackRock TCP and Hercules Capital

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

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

Diversification Opportunities for BlackRock TCP and Hercules Capital

-0.31

Correlation Coefficient

BlackRock TCP  Hercules Capital

Very good diversification

The 3 months correlation between BlackRock and Hercules is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock TCP Capital and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and BlackRock TCP 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 BlackRock TCP 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 BlackRock TCP i.e., BlackRock TCP and Hercules Capital go up and down completely randomly.

Pair Corralation between BlackRock TCP and Hercules Capital

Given the investment horizon of 90 days BlackRock TCP Capital is expected to generate 1.67 times more return on investment than Hercules Capital. However, BlackRock TCP is 1.67 times more volatile than Hercules Capital. It trades about 0.09 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.04 per unit of risk. If you would invest  863.00  in BlackRock TCP Capital on September 13, 2024 and sell it today you would earn a total of  78.00  from holding BlackRock TCP Capital or generate 9.04% return on investment over 90 days.

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

BlackRock TCP Capital  vs.  Hercules Capital

BlackRock TCP Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock TCP Capital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, BlackRock TCP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hercules Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 BlackRock TCP and Hercules Capital

The main advantage of trading using opposite BlackRock TCP and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BlackRock TCP 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 BlackRock TCP 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.