Correlation Between Gores Holdings and Digital World

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Can any of the company-specific risk be diversified away by investing in both Gores Holdings and Digital World 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 Digital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gores Holdings VIII and Digital World Acquisition, you can compare the effects of market volatilities on Gores Holdings and Digital World 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 Digital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gores Holdings and Digital World.

Diversification Opportunities for Gores Holdings and Digital World

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Gores and Digital is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Gores Holdings VIII and Digital World Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital World Acquisition 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 VIII are associated (or correlated) with Digital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital World Acquisition has no effect on the direction of Gores Holdings i.e., Gores Holdings and Digital World go up and down completely randomly.

Pair Corralation between Gores Holdings and Digital World

If you would invest  3,642  in Digital World Acquisition on January 19, 2024 and sell it today you would earn a total of  2,157  from holding Digital World Acquisition or generate 59.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Gores Holdings VIII  vs.  Digital World Acquisition

 Performance 
       Timeline  
Gores Holdings VIII 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Gores Holdings VIII has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gores Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.
Digital World Acquisition 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Good
Over the last 90 days Digital World Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak basic indicators, Digital World exhibited solid returns over the last few months and may actually be approaching a breakup point.

Gores Holdings and Digital World Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Gores Holdings and Digital World

The main advantage of trading using opposite Gores Holdings and Digital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gores Holdings position performs unexpectedly, Digital World 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 Digital World will offset losses from the drop in Digital World's long position.
The idea behind Gores Holdings VIII and Digital World 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.
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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