Correlation Between Dow Jones and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Hercules Capital, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hercules Capital.
Diversification Opportunities for Dow Jones and Hercules Capital
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Hercules is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Hercules Capital go up and down completely randomly.
Pair Corralation between Dow Jones and Hercules Capital
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.24 times less return on investment than Hercules Capital. But when comparing it to its historical volatility, Dow Jones Industrial is 2.19 times less risky than Hercules Capital. It trades about 0.12 of its potential returns per unit of risk. Hercules Capital is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,364 in Hercules Capital on September 26, 2024 and sell it today you would earn a total of 470.00 from holding Hercules Capital or generate 34.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.42% |
| Values | Daily Returns |
Dow Jones Industrial vs. Hercules Capital
Performance |
| Timeline |
Dow Jones and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hercules Capital
Pair trading matchups for Hercules Capital
Pair Trading with Dow Jones and Hercules Capital
The main advantage of trading using opposite Dow Jones and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Sabre Corpo | Dow Jones vs. Cannae Holdings | Dow Jones vs. Pekin Life Insurance | Dow Jones vs. Supercom |
| Hercules Capital vs. Harmony Gold Mining | Hercules Capital vs. Evolution Mining Limited | Hercules Capital vs. ORMAT TECHNOLOGIES | Hercules Capital vs. GRIFFIN MINING LTD |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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