Correlation Between Enfusion and Waldencast Acquisition

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

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

Diversification Opportunities for Enfusion and Waldencast Acquisition

-0.47

Correlation Coefficient

Enfusion  Waldencast Acquisition

Very good diversification

The 3 months correlation between Enfusion and Waldencast is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Enfusion and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and Enfusion 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 Enfusion 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 Enfusion i.e., Enfusion and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between Enfusion and Waldencast Acquisition

Given the investment horizon of 90 days Enfusion is expected to generate 1.39 times less return on investment than Waldencast Acquisition. But when comparing it to its historical volatility, Enfusion is 5.76 times less risky than Waldencast Acquisition. It trades about 0.17 of its potential returns per unit of risk. Waldencast Acquisition Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Waldencast Acquisition Corp on September 3, 2024 and sell it today you would lose (1.00) from holding Waldencast Acquisition Corp or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Enfusion  vs.  Waldencast Acquisition Corp

Enfusion

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enfusion are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Enfusion displayed solid returns over the last few months and may actually be approaching a breakup point.

Waldencast Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waldencast Acquisition Corp are ranked lower than 3 (%) 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.

Pair Trading with Enfusion and Waldencast Acquisition

The main advantage of trading using opposite Enfusion and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enfusion 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 Enfusion 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.