Correlation Between Alkami Technology and Waldencast Acquisition

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

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

Diversification Opportunities for Alkami Technology and Waldencast Acquisition

-0.5

Correlation Coefficient

Alkami Technology  Waldencast Acquisition

Very good diversification

The 3 months correlation between Alkami and Waldencast is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Alkami Technology and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and Alkami Technology 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 Alkami Technology 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 Alkami Technology i.e., Alkami Technology and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between Alkami Technology and Waldencast Acquisition

Given the investment horizon of 90 days Alkami Technology is expected to generate 0.58 times more return on investment than Waldencast Acquisition. However, Alkami Technology is 1.71 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 0.06 per unit of risk. If you would invest  3,171  in Alkami Technology on September 2, 2024 and sell it today you would earn a total of  776.00  from holding Alkami Technology or generate 24.47% return on investment over 90 days.

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

Alkami Technology  vs.  Waldencast Acquisition Corp

Alkami Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkami Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Alkami Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Waldencast Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waldencast Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Waldencast Acquisition exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alkami Technology and Waldencast Acquisition

The main advantage of trading using opposite Alkami Technology and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkami Technology 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 Alkami Technology 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.