Correlation Between Gores Holdings and Embrace Change

Can any of the company-specific risk be diversified away by investing in both Gores Holdings and Embrace Change 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 Embrace Change 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 Embrace Change Acquisition, you can compare the effects of market volatilities on Gores Holdings and Embrace Change 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 Embrace Change. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gores Holdings and Embrace Change.

Diversification Opportunities for Gores Holdings and Embrace Change

-0.53

Correlation Coefficient

Gores Holdings  Embrace Change

Excellent diversification

The 3 months correlation between Gores and Embrace is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Gores Holdings IX and Embrace Change Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embrace Change Acqui 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 Embrace Change. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embrace Change Acqui has no effect on the direction of Gores Holdings i.e., Gores Holdings and Embrace Change go up and down completely randomly.

Pair Corralation between Gores Holdings and Embrace Change

Given the investment horizon of 90 days Gores Holdings IX is expected to under-perform the Embrace Change. In addition to that, Gores Holdings is 1.28 times more volatile than Embrace Change Acquisition. It trades about -0.31 of its total potential returns per unit of risk. Embrace Change Acquisition is currently generating about -0.03 per unit of volatility. If you would invest  1,164  in Embrace Change Acquisition on September 17, 2024 and sell it today you would lose (4.00) from holding Embrace Change Acquisition or give up 0.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	71.43%
Values	Daily Returns

Gores Holdings IX  vs.  Embrace Change 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 fairly strong forward indicators, Gores Holdings is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Embrace Change Acqui

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Embrace Change Acquisition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Embrace Change is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Gores Holdings and Embrace Change

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

The idea behind Gores Holdings IX and Embrace Change 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.