Correlation Between Waldencast Acquisition and Applied Materials

Can any of the company-specific risk be diversified away by investing in both Waldencast Acquisition and Applied Materials 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 Waldencast Acquisition and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Waldencast Acquisition Corp and Applied Materials, you can compare the effects of market volatilities on Waldencast Acquisition and Applied Materials 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 Waldencast Acquisition with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waldencast Acquisition and Applied Materials.

Diversification Opportunities for Waldencast Acquisition and Applied Materials

-0.18

Correlation Coefficient

Waldencast Acquisition  Applied Materials

Good diversification

The 3 months correlation between Waldencast and Applied is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and Waldencast Acquisition 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 Waldencast Acquisition Corp are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and Applied Materials go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and Applied Materials

Given the investment horizon of 90 days Waldencast Acquisition Corp is expected to under-perform the Applied Materials. In addition to that, Waldencast Acquisition is 1.87 times more volatile than Applied Materials. It trades about -0.01 of its total potential returns per unit of risk. Applied Materials is currently generating about 0.07 per unit of volatility. If you would invest  10,452  in Applied Materials on February 9, 2024 and sell it today you would earn a total of  10,284  from holding Applied Materials or generate 98.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Waldencast Acquisition Corp  vs.  Applied Materials

Waldencast Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waldencast Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Applied Materials

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Materials are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Applied Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waldencast Acquisition and Applied Materials

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

The idea behind Waldencast Acquisition Corp and Applied Materials 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.