Correlation Between Investcorp Europe and Gores Holdings

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

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

Diversification Opportunities for Investcorp Europe and Gores Holdings

-0.46

Correlation Coefficient

Investcorp Europe  Gores Holdings

Very good diversification

The 3 months correlation between Investcorp and Gores is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Investcorp Europe Acquisition and Gores Holdings IX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gores Holdings IX and Investcorp Europe 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 Investcorp Europe Acquisition are associated (or correlated) with Gores Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gores Holdings IX has no effect on the direction of Investcorp Europe i.e., Investcorp Europe and Gores Holdings go up and down completely randomly.

Pair Corralation between Investcorp Europe and Gores Holdings

Given the investment horizon of 90 days Investcorp Europe Acquisition is expected to generate 1.29 times more return on investment than Gores Holdings. However, Investcorp Europe is 1.29 times more volatile than Gores Holdings IX. It trades about 0.21 of its potential returns per unit of risk. Gores Holdings IX is currently generating about -0.16 per unit of risk. If you would invest  1,090  in Investcorp Europe Acquisition on September 13, 2024 and sell it today you would earn a total of  74.00  from holding Investcorp Europe Acquisition or generate 6.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Investcorp Europe Acquisition  vs.  Gores Holdings IX

Investcorp Europe

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Investcorp Europe Acquisition are ranked lower than 16 (%) 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.

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.

Pair Trading with Investcorp Europe and Gores Holdings

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

The idea behind Investcorp Europe Acquisition and Gores Holdings IX 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.