Correlation Between Prospect Capital and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both Prospect Capital 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 Prospect Capital and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prospect Capital and Hercules Capital, you can compare the effects of market volatilities on Prospect Capital 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 Prospect Capital with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prospect Capital and Hercules Capital.
Diversification Opportunities for Prospect Capital and Hercules Capital
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Prospect and Hercules is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Prospect 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 Prospect 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 Prospect Capital i.e., Prospect Capital and Hercules Capital go up and down completely randomly.
Pair Corralation between Prospect Capital and Hercules Capital
Given the investment horizon of 90 days Prospect Capital is expected to under-perform the Hercules Capital. In addition to that, Prospect Capital is 1.16 times more volatile than Hercules Capital. It trades about -0.01 of its total potential returns per unit of risk. Hercules Capital is currently generating about 0.04 per unit of volatility. If you would invest 1,697 in Hercules Capital on August 27, 2024 and sell it today you would earn a total of 179.00 from holding Hercules Capital or generate 10.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prospect Capital vs. Hercules Capital
Performance |
| Timeline |
| Prospect Capital |
| Hercules Capital |
Prospect Capital and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prospect Capital and Hercules Capital
The main advantage of trading using opposite Prospect Capital and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital 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.| Prospect Capital vs. PowerUp Acquisition Corp | Prospect Capital vs. Aurora Innovation | Prospect Capital vs. HUMANA INC | Prospect Capital vs. Aquagold International |
| Hercules Capital vs. Main Street Capital | Hercules Capital vs. PennantPark Floating Rate | Hercules Capital vs. FS KKR Capital | Hercules Capital vs. Prospect Capital |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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