Correlation Between CLOUDFLARE INC and Hercules Capital

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Can any of the company-specific risk be diversified away by investing in both CLOUDFLARE INC 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 CLOUDFLARE INC and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CLOUDFLARE INC A and Hercules Capital, you can compare the effects of market volatilities on CLOUDFLARE INC 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 CLOUDFLARE INC with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of CLOUDFLARE INC and Hercules Capital.

Diversification Opportunities for CLOUDFLARE INC and Hercules Capital

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between CLOUDFLARE and Hercules is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CLOUDFLARE INC A and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and CLOUDFLARE INC 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 CLOUDFLARE INC A 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 CLOUDFLARE INC i.e., CLOUDFLARE INC and Hercules Capital go up and down completely randomly.

Pair Corralation between CLOUDFLARE INC and Hercules Capital

Assuming the 90 days trading horizon CLOUDFLARE INC A is expected to generate 2.15 times more return on investment than Hercules Capital. However, CLOUDFLARE INC is 2.15 times more volatile than Hercules Capital. It trades about 0.12 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.08 per unit of risk. If you would invest  10,198  in CLOUDFLARE INC A on September 25, 2024 and sell it today you would earn a total of  648.00  from holding CLOUDFLARE INC A or generate 6.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

CLOUDFLARE INC A  vs.  Hercules Capital

 Performance 
       Timeline  
CLOUDFLARE INC A 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in CLOUDFLARE INC A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, CLOUDFLARE INC unveiled solid returns over the last few months and may actually be approaching a breakup point.
Hercules Capital 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hercules Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CLOUDFLARE INC and Hercules Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CLOUDFLARE INC and Hercules Capital

The main advantage of trading using opposite CLOUDFLARE INC and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CLOUDFLARE INC 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 CLOUDFLARE INC A 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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