Correlation Between NextPlat Corp and Waldencast Acquisition

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

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

Diversification Opportunities for NextPlat Corp and Waldencast Acquisition

-0.37

Correlation Coefficient

NextPlat Corp  Waldencast Acquisition

Very good diversification

The 3 months correlation between NextPlat and Waldencast is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding NextPlat 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 NextPlat Corp 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 NextPlat 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 NextPlat Corp i.e., NextPlat Corp and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between NextPlat Corp and Waldencast Acquisition

Assuming the 90 days horizon NextPlat Corp is expected to generate 6.97 times more return on investment than Waldencast Acquisition. However, NextPlat Corp is 6.97 times more volatile than Waldencast Acquisition Corp. It trades about 0.18 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  11.00  in NextPlat Corp on November 29, 2024 and sell it today you would earn a total of  8.00  from holding NextPlat Corp or generate 72.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.75%
Values	Daily Returns

NextPlat Corp  vs.  Waldencast Acquisition Corp

NextPlat Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NextPlat Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, NextPlat Corp showed 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 NextPlat Corp and Waldencast Acquisition

The main advantage of trading using opposite NextPlat Corp and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NextPlat Corp 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 NextPlat 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.