Correlation Between Hercules Capital and Prospect Capital

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

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

Diversification Opportunities for Hercules Capital and Prospect Capital

-0.03

Correlation Coefficient

Hercules Capital  Prospect Capital

Good diversification

The 3 months correlation between Hercules and Prospect is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital and Prospect Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospect Capital and Hercules 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 Hercules Capital are associated (or correlated) with Prospect Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospect Capital has no effect on the direction of Hercules Capital i.e., Hercules Capital and Prospect Capital go up and down completely randomly.

Pair Corralation between Hercules Capital and Prospect Capital

Given the investment horizon of 90 days Hercules Capital is expected to generate 0.65 times more return on investment than Prospect Capital. However, Hercules Capital is 1.53 times less risky than Prospect Capital. It trades about 0.17 of its potential returns per unit of risk. Prospect Capital is currently generating about -0.03 per unit of risk. If you would invest  1,741  in Hercules Capital on May 1, 2025 and sell it today you would earn a total of  179.00  from holding Hercules Capital or generate 10.28% return on investment over 90 days.

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

Hercules Capital  vs.  Prospect Capital

Hercules Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hercules Capital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Hercules Capital may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Prospect Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Prospect Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hercules Capital and Prospect Capital

The main advantage of trading using opposite Hercules Capital and Prospect Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hercules Capital position performs unexpectedly, Prospect 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 Prospect Capital will offset losses from the drop in Prospect Capital's long position.

The idea behind Hercules Capital and Prospect 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.