Correlation Between BASE and Waldencast Acquisition

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

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

Diversification Opportunities for BASE and Waldencast Acquisition

0.24

Correlation Coefficient

BASE  Waldencast Acquisition

Modest diversification

The 3 months correlation between BASE and Waldencast is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding BASE Inc and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and BASE 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 BASE Inc 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 BASE i.e., BASE and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between BASE and Waldencast Acquisition

Assuming the 90 days horizon BASE Inc is expected to under-perform the Waldencast Acquisition. But the pink sheet apears to be less risky and, when comparing its historical volatility, BASE Inc is 1.0 times less risky than Waldencast Acquisition. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Waldencast Acquisition Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  301.00  in Waldencast Acquisition Corp on September 2, 2024 and sell it today you would earn a total of  37.00  from holding Waldencast Acquisition Corp or generate 12.29% return on investment over 90 days.

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

BASE Inc  vs.  Waldencast Acquisition Corp

BASE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BASE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 BASE and Waldencast Acquisition

The main advantage of trading using opposite BASE and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BASE 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 BASE Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.