Correlation Between Waldencast Acquisition and Sprout Social

Can any of the company-specific risk be diversified away by investing in both Waldencast Acquisition and Sprout Social 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 Sprout Social 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 Sprout Social, you can compare the effects of market volatilities on Waldencast Acquisition and Sprout Social 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 Sprout Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waldencast Acquisition and Sprout Social.

Diversification Opportunities for Waldencast Acquisition and Sprout Social

0.44

Correlation Coefficient

Waldencast Acquisition  Sprout Social

Very weak diversification

The 3 months correlation between Waldencast and Sprout is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and Sprout Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprout Social 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 Sprout Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprout Social has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and Sprout Social go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and Sprout Social

Given the investment horizon of 90 days Waldencast Acquisition Corp is expected to generate 1.51 times more return on investment than Sprout Social. However, Waldencast Acquisition is 1.51 times more volatile than Sprout Social. It trades about -0.11 of its potential returns per unit of risk. Sprout Social is currently generating about -0.22 per unit of risk. If you would invest  389.00  in Waldencast Acquisition Corp on December 30, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Waldencast Acquisition Corp  vs.  Sprout Social

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.

Sprout Social

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sprout Social 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Waldencast Acquisition and Sprout Social

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

The idea behind Waldencast Acquisition Corp and Sprout Social 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.