Correlation Between Waldencast Acquisition and SoundHound

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

Diversification Opportunities for Waldencast Acquisition and SoundHound

-0.36

Correlation Coefficient

Waldencast Acquisition  SoundHound

Very good diversification

The 3 months correlation between Waldencast and SoundHound is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and SoundHound AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoundHound AI 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 SoundHound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoundHound AI has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and SoundHound go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and SoundHound

Assuming the 90 days horizon Waldencast Acquisition Corp is expected to under-perform the SoundHound. In addition to that, Waldencast Acquisition is 1.62 times more volatile than SoundHound AI. It trades about -0.05 of its total potential returns per unit of risk. SoundHound AI is currently generating about 0.2 per unit of volatility. If you would invest  191.00  in SoundHound AI on September 5, 2024 and sell it today you would earn a total of  189.00  from holding SoundHound AI or generate 98.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Waldencast Acquisition Corp  vs.  SoundHound AI

Waldencast Acquisition

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

SoundHound AI

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SoundHound showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waldencast Acquisition and SoundHound

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

The idea behind Waldencast Acquisition Corp and SoundHound AI 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.