Correlation Between ADEIA P and Waldencast Acquisition

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

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

Diversification Opportunities for ADEIA P and Waldencast Acquisition

-0.04

Correlation Coefficient

ADEIA P  Waldencast Acquisition

Good diversification

The 3 months correlation between ADEIA and Waldencast is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding ADEIA P and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and ADEIA P 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 ADEIA P are associated (or correlated) with Waldencast Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waldencast Acquisition has no effect on the direction of ADEIA P i.e., ADEIA P and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between ADEIA P and Waldencast Acquisition

Given the investment horizon of 90 days ADEIA P is expected to generate 0.94 times more return on investment than Waldencast Acquisition. However, ADEIA P is 1.07 times less risky than Waldencast Acquisition. It trades about 0.15 of its potential returns per unit of risk. Waldencast Acquisition Corp is currently generating about -0.03 per unit of risk. If you would invest  1,212  in ADEIA P on November 29, 2024 and sell it today you would earn a total of  391.00  from holding ADEIA P or generate 32.26% return on investment over 90 days.

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

ADEIA P  vs.  Waldencast Acquisition Corp

ADEIA P

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ADEIA P are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, ADEIA P sustained solid returns over the last few months and may actually be approaching a breakup point.

Waldencast Acquisition

Risk-Adjusted Performance

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 latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ADEIA P and Waldencast Acquisition

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

The idea behind ADEIA P and Waldencast 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.