Correlation Between TROOPS and Waldencast Acquisition

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

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

Diversification Opportunities for TROOPS and Waldencast Acquisition

0.36

Correlation Coefficient

TROOPS  Waldencast Acquisition

Weak diversification

The 3 months correlation between TROOPS and Waldencast is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding TROOPS Inc and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and TROOPS 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 TROOPS Inc 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 TROOPS i.e., TROOPS and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between TROOPS and Waldencast Acquisition

Given the investment horizon of 90 days TROOPS Inc is expected to under-perform the Waldencast Acquisition. In addition to that, TROOPS is 1.27 times more volatile than Waldencast Acquisition Corp. It trades about -0.2 of its total potential returns per unit of risk. Waldencast Acquisition Corp is currently generating about 0.06 per unit of volatility. If you would invest  301.00  in Waldencast Acquisition Corp on September 3, 2024 and sell it today you would earn a total of  37.00  from holding Waldencast Acquisition Corp or generate 12.29% return on investment over 90 days.

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

TROOPS Inc  vs.  Waldencast Acquisition Corp

TROOPS Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TROOPS Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Waldencast Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waldencast Acquisition Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Waldencast Acquisition exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TROOPS and Waldencast Acquisition

The main advantage of trading using opposite TROOPS and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TROOPS 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 TROOPS Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.