Correlation Between Waldencast Acquisition and BHPA

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

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

Diversification Opportunities for Waldencast Acquisition and BHPA

0.02

Correlation Coefficient

Waldencast Acquisition  BHPA

Significant diversification

The 3 months correlation between Waldencast and BHPA is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and BHPA Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHPA Inc and Waldencast Acquisition 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 Waldencast Acquisition Corp are associated (or correlated) with BHPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHPA Inc has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and BHPA go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and BHPA

Given the investment horizon of 90 days Waldencast Acquisition Corp is expected to under-perform the BHPA. But the stock apears to be less risky and, when comparing its historical volatility, Waldencast Acquisition Corp is 3.87 times less risky than BHPA. The stock trades about -0.03 of its potential returns per unit of risk. The BHPA Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.50  in BHPA Inc on November 29, 2024 and sell it today you would lose (0.20) from holding BHPA Inc or give up 40.0% of portfolio value over 90 days.

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

Waldencast Acquisition Corp  vs.  BHPA Inc

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.

BHPA Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days BHPA Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat fragile basic indicators, BHPA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Waldencast Acquisition and BHPA

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

The idea behind Waldencast Acquisition Corp and BHPA Inc 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.

Check out your portfolio center.

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.