Correlation Between Hercules Capital and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Hercules Capital and Ally Financial 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 Ally Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hercules Capital and Ally Financial, you can compare the effects of market volatilities on Hercules Capital and Ally Financial 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 Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hercules Capital and Ally Financial.
Diversification Opportunities for Hercules Capital and Ally Financial
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hercules and Ally is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Hercules Capital i.e., Hercules Capital and Ally Financial go up and down completely randomly.
Pair Corralation between Hercules Capital and Ally Financial
Assuming the 90 days horizon Hercules Capital is expected to generate 0.65 times more return on investment than Ally Financial. However, Hercules Capital is 1.54 times less risky than Ally Financial. It trades about 0.1 of its potential returns per unit of risk. Ally Financial is currently generating about 0.06 per unit of risk. If you would invest 1,766 in Hercules Capital on October 14, 2024 and sell it today you would earn a total of 154.00 from holding Hercules Capital or generate 8.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hercules Capital vs. Ally Financial
Performance |
| Timeline |
| Hercules Capital |
| Ally Financial |
Hercules Capital and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hercules Capital and Ally Financial
The main advantage of trading using opposite Hercules Capital and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hercules Capital position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Hercules Capital vs. Tokyu Construction Co | Hercules Capital vs. MidCap Financial Investment | Hercules Capital vs. FARM 51 GROUP | Hercules Capital vs. TITAN MACHINERY |
| Ally Financial vs. SINGAPORE AIRLINES | Ally Financial vs. Singapore Airlines Limited | Ally Financial vs. Q2M Managementberatung AG | Ally Financial vs. SOUTHWEST AIRLINES |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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