Correlation Between Waldencast Acquisition and Alkami Technology

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

Diversification Opportunities for Waldencast Acquisition and Alkami Technology

-0.5

Correlation Coefficient

Waldencast Acquisition  Alkami Technology

Very good diversification

The 3 months correlation between Waldencast and Alkami is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and Alkami Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkami Technology 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 Alkami Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkami Technology has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and Alkami Technology go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and Alkami Technology

Given the investment horizon of 90 days Waldencast Acquisition is expected to generate 1.37 times less return on investment than Alkami Technology. In addition to that, Waldencast Acquisition is 1.71 times more volatile than Alkami Technology. It trades about 0.06 of its total potential returns per unit of risk. Alkami Technology is currently generating about 0.15 per unit of volatility. If you would invest  3,171  in Alkami Technology on September 2, 2024 and sell it today you would earn a total of  776.00  from holding Alkami Technology or generate 24.47% return on investment over 90 days.

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

Waldencast Acquisition Corp  vs.  Alkami Technology

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 fragile essential indicators, Waldencast Acquisition exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alkami Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alkami Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, Alkami Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waldencast Acquisition and Alkami Technology

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

The idea behind Waldencast Acquisition Corp and Alkami Technology 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.