Correlation Between ATT and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both ATT 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 ATT and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATT Inc and Hercules Capital, you can compare the effects of market volatilities on ATT 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 ATT with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATT and Hercules Capital.
Diversification Opportunities for ATT and Hercules Capital
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ATT and Hercules is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and ATT 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 ATT Inc 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 ATT i.e., ATT and Hercules Capital go up and down completely randomly.
Pair Corralation between ATT and Hercules Capital
Assuming the 90 days trading horizon ATT Inc is expected to under-perform the Hercules Capital. In addition to that, ATT is 1.08 times more volatile than Hercules Capital. It trades about -0.02 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 |
ATT Inc vs. Hercules Capital
Performance |
| Timeline |
| ATT Inc |
| Hercules Capital |
ATT and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ATT and Hercules Capital
The main advantage of trading using opposite ATT and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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.| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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