Correlation Between Ally Financial and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both Ally Financial 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 Ally Financial and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ally Financial and Hercules Capital, you can compare the effects of market volatilities on Ally Financial 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 Ally Financial with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ally Financial and Hercules Capital.
Diversification Opportunities for Ally Financial and Hercules Capital
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ally and Hercules is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ally Financial and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Ally Financial 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 Ally Financial 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 Ally Financial i.e., Ally Financial and Hercules Capital go up and down completely randomly.
Pair Corralation between Ally Financial and Hercules Capital
Assuming the 90 days horizon Ally Financial is expected to under-perform the Hercules Capital. In addition to that, Ally Financial is 1.29 times more volatile than Hercules Capital. It trades about -0.29 of its total potential returns per unit of risk. Hercules Capital is currently generating about 0.08 per unit of volatility. If you would invest 1,801 in Hercules Capital on September 25, 2024 and sell it today you would earn a total of 33.00 from holding Hercules Capital or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ally Financial vs. Hercules Capital
Performance |
| Timeline |
| Ally Financial |
| Hercules Capital |
Ally Financial and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ally Financial and Hercules Capital
The main advantage of trading using opposite Ally Financial and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ally Financial 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.| Ally Financial vs. BW OFFSHORE LTD | Ally Financial vs. Caseys General Stores | Ally Financial vs. Fast Retailing Co | Ally Financial vs. Burlington Stores |
| Hercules Capital vs. HEMISPHERE EGY | Hercules Capital vs. Spirent Communications plc | Hercules Capital vs. Sixt Leasing SE | Hercules Capital vs. United Internet AG |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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