Correlation Between Gores Holdings and Plum Acquisition

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

Diversification Opportunities for Gores Holdings and Plum Acquisition

-0.89

Correlation Coefficient

Gores Holdings  Plum Acquisition

Pay attention - limited upside

The 3 months correlation between Gores and Plum is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Gores Holdings IX and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of Gores Holdings i.e., Gores Holdings and Plum Acquisition go up and down completely randomly.

Pair Corralation between Gores Holdings and Plum Acquisition

Given the investment horizon of 90 days Gores Holdings is expected to generate 1170.81 times less return on investment than Plum Acquisition. But when comparing it to its historical volatility, Gores Holdings IX is 145.64 times less risky than Plum Acquisition. It trades about 0.01 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Plum Acquisition Corp on October 1, 2024 and sell it today you would earn a total of  10.00  from holding Plum Acquisition Corp or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	55.75%
Values	Daily Returns

Gores Holdings IX  vs.  Plum 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 current stock price disturbance, may contribute to short-term losses for the investors.

Plum Acquisition Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plum Acquisition Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward-looking indicators, Plum Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gores Holdings and Plum Acquisition

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

The idea behind Gores Holdings IX and Plum 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.