Correlation Between LQwD FinTech and Waldencast Acquisition

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

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

Diversification Opportunities for LQwD FinTech and Waldencast Acquisition

0.31

Correlation Coefficient

LQwD FinTech  Waldencast Acquisition

Weak diversification

The 3 months correlation between LQwD and Waldencast is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding LQwD FinTech Corp and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and LQwD FinTech 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 LQwD FinTech Corp 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 LQwD FinTech i.e., LQwD FinTech and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between LQwD FinTech and Waldencast Acquisition

Assuming the 90 days horizon LQwD FinTech Corp is expected to under-perform the Waldencast Acquisition. In addition to that, LQwD FinTech is 2.23 times more volatile than Waldencast Acquisition Corp. It trades about -0.09 of its total potential returns per unit of risk. Waldencast Acquisition Corp is currently generating about -0.11 per unit of volatility. If you would invest  389.00  in Waldencast Acquisition Corp on December 29, 2024 and sell it today you would lose (90.00) from holding Waldencast Acquisition Corp or give up 23.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

LQwD FinTech Corp  vs.  Waldencast Acquisition Corp

LQwD FinTech Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days LQwD FinTech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with LQwD FinTech and Waldencast Acquisition

The main advantage of trading using opposite LQwD FinTech and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LQwD FinTech 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 LQwD FinTech Corp 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.