Correlation Between Gores Holdings and Cactus Acquisition

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

Diversification Opportunities for Gores Holdings and Cactus Acquisition

0.03

Correlation Coefficient

Gores Holdings  Cactus Acquisition

Significant diversification

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

Pair Corralation between Gores Holdings and Cactus Acquisition

Given the investment horizon of 90 days Gores Holdings IX is expected to under-perform the Cactus Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Gores Holdings IX is 6.67 times less risky than Cactus Acquisition. The stock trades about -0.17 of its potential returns per unit of risk. The Cactus Acquisition Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,146  in Cactus Acquisition Corp on September 17, 2024 and sell it today you would lose (7.00) from holding Cactus Acquisition Corp or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Gores Holdings IX  vs.  Cactus Acquisition Corp

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.

Cactus Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cactus Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cactus Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gores Holdings and Cactus Acquisition

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

The idea behind Gores Holdings IX and Cactus Acquisition Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.