Correlation Between Visa and Hercules Capital
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Hercules Capital, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Hercules Capital.
Diversification Opportunities for Visa and Hercules Capital
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Visa and Hercules is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Visa 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 Visa Class 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 Visa i.e., Visa and Hercules Capital go up and down completely randomly.
Pair Corralation between Visa and Hercules Capital
Taking into account the 90-day investment horizon Visa is expected to generate 1.4 times less return on investment than Hercules Capital. But when comparing it to its historical volatility, Visa Class A is 1.78 times less risky than Hercules Capital. It trades about 0.09 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 1,053 in Hercules Capital on September 26, 2024 and sell it today you would earn a total of 781.00 from holding Hercules Capital or generate 74.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
Visa Class A vs. Hercules Capital
Performance |
| Timeline |
| Visa Class A |
| Hercules Capital |
Visa and Hercules Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Hercules Capital
The main advantage of trading using opposite Visa and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Upstart Holdings | Visa vs. Capital One Financial | Visa vs. Ally Financial |
| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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