Correlation Between Gores Holdings and Investcorp Europe

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

Diversification Opportunities for Gores Holdings and Investcorp Europe

0.04

Correlation Coefficient

Gores Holdings  Investcorp Europe

Significant diversification

The 3 months correlation between Gores and Investcorp is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Gores Holdings IX and Investcorp Europe Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investcorp Europe 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 Investcorp Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investcorp Europe has no effect on the direction of Gores Holdings i.e., Gores Holdings and Investcorp Europe go up and down completely randomly.

Pair Corralation between Gores Holdings and Investcorp Europe

Given the investment horizon of 90 days Gores Holdings IX is expected to under-perform the Investcorp Europe. But the stock apears to be less risky and, when comparing its historical volatility, Gores Holdings IX is 1.27 times less risky than Investcorp Europe. The stock trades about -0.17 of its potential returns per unit of risk. The Investcorp Europe Acquisition is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,090  in Investcorp Europe Acquisition on September 17, 2024 and sell it today you would earn a total of  80.00  from holding Investcorp Europe Acquisition or generate 7.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.77%
Values	Daily Returns

Gores Holdings IX  vs.  Investcorp Europe 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.

Investcorp Europe

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp Europe Acquisition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Investcorp Europe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Gores Holdings and Investcorp Europe

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

The idea behind Gores Holdings IX and Investcorp Europe 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.