Correlation Between Colgate Palmolive and Waldencast Acquisition

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

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

Diversification Opportunities for Colgate Palmolive and Waldencast Acquisition

-0.51

Correlation Coefficient

Colgate Palmolive  Waldencast Acquisition

Excellent diversification

The 3 months correlation between Colgate and Waldencast is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Colgate Palmolive and Waldencast Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waldencast Acquisition and Colgate Palmolive 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 Colgate Palmolive 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 Colgate Palmolive i.e., Colgate Palmolive and Waldencast Acquisition go up and down completely randomly.

Pair Corralation between Colgate Palmolive and Waldencast Acquisition

Allowing for the 90-day total investment horizon Colgate Palmolive is expected to generate 3.67 times less return on investment than Waldencast Acquisition. But when comparing it to its historical volatility, Colgate Palmolive is 3.42 times less risky than Waldencast Acquisition. It trades about 0.09 of its potential returns per unit of risk. Waldencast Acquisition Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  251.00  in Waldencast Acquisition Corp on February 5, 2025 and sell it today you would earn a total of  20.00  from holding Waldencast Acquisition Corp or generate 7.97% return on investment over 90 days.

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

Colgate Palmolive  vs.  Waldencast Acquisition Corp

Colgate Palmolive

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Colgate Palmolive are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Colgate Palmolive may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Waldencast Acquisition

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in June 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Colgate Palmolive and Waldencast Acquisition

The main advantage of trading using opposite Colgate Palmolive and Waldencast Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colgate Palmolive 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 Colgate Palmolive 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.