Correlation Between GM and Local Bounti
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Local Bounti into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Local Bounti Corp, you can compare the effects of market volatilities on GM 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 GM with a short position of Local Bounti. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Local Bounti.
Diversification Opportunities for GM and Local Bounti
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between GM and Local is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Local Bounti go up and down completely randomly.
Pair Corralation between GM and Local Bounti
Allowing for the 90-day total investment horizon GM is expected to generate 1.76 times less return on investment than Local Bounti. But when comparing it to its historical volatility, General Motors is 4.57 times less risky than Local Bounti. It trades about 0.03 of its potential returns per unit of risk. Local Bounti Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 252.00 in Local Bounti Corp on October 26, 2024 and sell it today you would lose (38.00) from holding Local Bounti Corp or give up 15.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Local Bounti Corp
Performance |
| Timeline |
| General Motors |
| Local Bounti Corp |
GM and Local Bounti Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Local Bounti
The main advantage of trading using opposite GM and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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