Correlation Between Gores Holdings and Ares Acquisition

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

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

Diversification Opportunities for Gores Holdings and Ares Acquisition

-0.47

Correlation Coefficient

Gores Holdings  Ares Acquisition

Very good diversification

The 3 months correlation between Gores and Ares is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Gores Holdings IX and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition and Gores Holdings 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 Gores Holdings IX are associated (or correlated) with Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Gores Holdings i.e., Gores Holdings and Ares Acquisition go up and down completely randomly.

Pair Corralation between Gores Holdings and Ares Acquisition

Given the investment horizon of 90 days Gores Holdings IX is expected to under-perform the Ares Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Gores Holdings IX is 1.48 times less risky than Ares Acquisition. The stock trades about -0.22 of its potential returns per unit of risk. The Ares Acquisition is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,092  in Ares Acquisition on October 18, 2024 and sell it today you would earn a total of  48.00  from holding Ares Acquisition or generate 4.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	59.02%
Values	Daily Returns

Gores Holdings IX  vs.  Ares Acquisition

Gores Holdings IX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gores Holdings IX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ares Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Ares Acquisition is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Gores Holdings and Ares Acquisition

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

The idea behind Gores Holdings IX and Ares Acquisition 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .