Correlation Between Horizon Technology and Hercules Capital

Can any of the company-specific risk be diversified away by investing in both Horizon Technology 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 Horizon Technology and Hercules Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Horizon Technology Finance and Hercules Capital, you can compare the effects of market volatilities on Horizon Technology 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 Horizon Technology with a short position of Hercules Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Technology and Hercules Capital.

Diversification Opportunities for Horizon Technology and Hercules Capital

-0.09

Correlation Coefficient

Horizon Technology  Hercules Capital

Good diversification

The 3 months correlation between Horizon and Hercules is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Technology Finance and Hercules Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hercules Capital and Horizon Technology 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 Horizon Technology Finance 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 Horizon Technology i.e., Horizon Technology and Hercules Capital go up and down completely randomly.

Pair Corralation between Horizon Technology and Hercules Capital

Given the investment horizon of 90 days Horizon Technology Finance is expected to under-perform the Hercules Capital. But the stock apears to be less risky and, when comparing its historical volatility, Horizon Technology Finance is 1.02 times less risky than Hercules Capital. The stock trades about -0.21 of its potential returns per unit of risk. The Hercules Capital is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,866  in Hercules Capital on September 3, 2024 and sell it today you would earn a total of  27.00  from holding Hercules Capital or generate 1.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Horizon Technology Finance  vs.  Hercules Capital

Horizon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Horizon Technology Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hercules Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Hercules Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Horizon Technology and Hercules Capital

The main advantage of trading using opposite Horizon Technology and Hercules Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Technology 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 Horizon Technology Finance 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.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.