Correlation Between Alico and Local Bounti
Can any of the company-specific risk be diversified away by investing in both Alico and Local Bounti 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 Alico and Local Bounti into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alico Inc and Local Bounti Corp, you can compare the effects of market volatilities on Alico and Local Bounti 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 Alico with a short position of Local Bounti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alico and Local Bounti.
Diversification Opportunities for Alico and Local Bounti
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Alico and Local is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc and Local Bounti Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Local Bounti Corp and Alico 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 Alico Inc are associated (or correlated) with Local Bounti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Local Bounti Corp has no effect on the direction of Alico i.e., Alico and Local Bounti go up and down completely randomly.
Pair Corralation between Alico and Local Bounti
Given the investment horizon of 90 days Alico Inc is expected to generate 0.75 times more return on investment than Local Bounti. However, Alico Inc is 1.34 times less risky than Local Bounti. It trades about 0.01 of its potential returns per unit of risk. Local Bounti Corp is currently generating about -0.02 per unit of risk. If you would invest 3,139 in Alico Inc on November 5, 2024 and sell it today you would lose (7.00) from holding Alico Inc or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alico Inc vs. Local Bounti Corp
Performance |
| Timeline |
| Alico Inc |
| Local Bounti Corp |
Alico and Local Bounti Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alico and Local Bounti
The main advantage of trading using opposite Alico and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alico position performs unexpectedly, Local Bounti 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 Local Bounti will offset losses from the drop in Local Bounti's long position.The idea behind Alico Inc and Local Bounti 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.| Local Bounti vs. Fresh Del Monte | Local Bounti vs. Alico Inc | Local Bounti vs. SW Seed Company | Local Bounti vs. Adecoagro SA |
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 Stocks Directory module to find actively traded stocks across global markets.
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