Correlation Between Waldencast Acquisition and European Wax

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

Diversification Opportunities for Waldencast Acquisition and European Wax

-0.1

Correlation Coefficient

Waldencast Acquisition  European Wax

Good diversification

The 3 months correlation between Waldencast and European is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Waldencast Acquisition Corp and European Wax Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on European Wax Center 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 European Wax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of European Wax Center has no effect on the direction of Waldencast Acquisition i.e., Waldencast Acquisition and European Wax go up and down completely randomly.

Pair Corralation between Waldencast Acquisition and European Wax

Assuming the 90 days horizon Waldencast Acquisition is expected to generate 1.07 times less return on investment than European Wax. In addition to that, Waldencast Acquisition is 5.16 times more volatile than European Wax Center. It trades about 0.06 of its total potential returns per unit of risk. European Wax Center is currently generating about 0.31 per unit of volatility. If you would invest  678.00  in European Wax Center on August 12, 2024 and sell it today you would earn a total of  115.00  from holding European Wax Center or generate 16.96% return on investment over 90 days.

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

Waldencast Acquisition Corp  vs.  European Wax Center

Waldencast Acquisition

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waldencast Acquisition Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Waldencast Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

European Wax Center

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in European Wax Center are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady fundamental indicators, European Wax showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waldencast Acquisition and European Wax

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

The idea behind Waldencast Acquisition Corp and European Wax Center 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.