Correlation Between Gores Holdings and Hennessy Capital
Can any of the company-specific risk be diversified away by investing in both Gores Holdings and Hennessy Capital 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 Hennessy Capital 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 Hennessy Capital Investment, you can compare the effects of market volatilities on Gores Holdings and Hennessy Capital 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 Hennessy Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gores Holdings and Hennessy Capital.
Diversification Opportunities for Gores Holdings and Hennessy Capital
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gores and Hennessy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Gores Holdings IX and Hennessy Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Capital Inv 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 Hennessy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Capital Inv has no effect on the direction of Gores Holdings i.e., Gores Holdings and Hennessy Capital go up and down completely randomly.
Pair Corralation between Gores Holdings and Hennessy Capital
Assuming the 90 days horizon Gores Holdings IX is expected to generate 1.42 times more return on investment than Hennessy Capital. However, Gores Holdings is 1.42 times more volatile than Hennessy Capital Investment. It trades about 0.25 of its potential returns per unit of risk. Hennessy Capital Investment is currently generating about 0.18 per unit of risk. If you would invest 10.00 in Gores Holdings IX on September 1, 2024 and sell it today you would lose (9.84) from holding Gores Holdings IX or give up 98.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 80.0% |
| Values | Daily Returns |
Gores Holdings IX vs. Hennessy Capital Investment
Performance |
| Timeline |
| Gores Holdings IX |
| Hennessy Capital Inv |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Gores Holdings and Hennessy Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gores Holdings and Hennessy Capital
The main advantage of trading using opposite Gores Holdings and Hennessy Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gores Holdings position performs unexpectedly, Hennessy Capital 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 Hennessy Capital will offset losses from the drop in Hennessy Capital's long position.The idea behind Gores Holdings IX and Hennessy Capital Investment 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.Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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