Correlation Between Xos Equity and Waldencast Acquisition

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Can any of the company-specific risk be diversified away by investing in both Xos Equity 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 Xos Equity and Waldencast Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xos Equity Warrants and Waldencast Acquisition Corp, you can compare the effects of market volatilities on Xos Equity 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 Xos Equity with a short position of Waldencast Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xos Equity and Waldencast Acquisition.

Diversification Opportunities for Xos Equity and Waldencast Acquisition

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between Xos and Waldencast is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Xos Equity Warrants and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and Xos Equity 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 Xos Equity Warrants 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 Xos Equity i.e., Xos Equity and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between Xos Equity and Waldencast Acquisition

Assuming the 90 days horizon Xos Equity Warrants is expected to generate 2.03 times more return on investment than Waldencast Acquisition. However, Xos Equity is 2.03 times more volatile than Waldencast Acquisition Corp. It trades about 0.27 of its potential returns per unit of risk. Waldencast Acquisition Corp is currently generating about 0.18 per unit of risk. If you would invest  0.56  in Xos Equity Warrants on October 12, 2024 and sell it today you would earn a total of  0.72  from holding Xos Equity Warrants or generate 128.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Xos Equity Warrants  vs.  Waldencast Acquisition Corp

 Performance 
       Timeline  
Xos Equity Warrants 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Xos Equity Warrants are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xos Equity showed solid returns over the last few months and may actually be approaching a breakup point.
Waldencast Acquisition 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Waldencast Acquisition Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, Waldencast Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Xos Equity and Waldencast Acquisition Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xos Equity and Waldencast Acquisition

The main advantage of trading using opposite Xos Equity and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xos Equity 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 Xos Equity Warrants 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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