Correlation Between Waldencast Acquisition and BASE

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

Diversification Opportunities for Waldencast Acquisition and BASE

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Waldencast and BASE is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and BASE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BASE 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 BASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BASE Inc has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and BASE go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and BASE

Given the investment horizon of 90 days Waldencast Acquisition is expected to generate 2.67 times less return on investment than BASE. But when comparing it to its historical volatility, Waldencast Acquisition Corp is 1.78 times less risky than BASE. It trades about 0.15 of its potential returns per unit of risk. BASE Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  150.00  in BASE Inc on September 23, 2024 and sell it today you would earn a total of  43.00  from holding BASE Inc or generate 28.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Waldencast Acquisition Corp  vs.  BASE Inc

 Performance 
       Timeline  
Waldencast Acquisition 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 rather sound essential indicators, Waldencast Acquisition is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
BASE Inc 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BASE Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, BASE reported solid returns over the last few months and may actually be approaching a breakup point.

Waldencast Acquisition and BASE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Waldencast Acquisition and BASE

The main advantage of trading using opposite Waldencast Acquisition and BASE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waldencast Acquisition position performs unexpectedly, BASE 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 BASE will offset losses from the drop in BASE's long position.
The idea behind Waldencast Acquisition Corp and BASE 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.
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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