Correlation Between Local Bounti and Vital Farms
Can any of the company-specific risk be diversified away by investing in both Local Bounti and Vital Farms 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 Local Bounti and Vital Farms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Local Bounti Corp and Vital Farms, you can compare the effects of market volatilities on Local Bounti and Vital Farms 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 Local Bounti with a short position of Vital Farms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Local Bounti and Vital Farms.
Diversification Opportunities for Local Bounti and Vital Farms
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Local and Vital is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Local Bounti Corp and Vital Farms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vital Farms and Local Bounti 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 Local Bounti Corp are associated (or correlated) with Vital Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vital Farms has no effect on the direction of Local Bounti i.e., Local Bounti and Vital Farms go up and down completely randomly.
Pair Corralation between Local Bounti and Vital Farms
Given the investment horizon of 90 days Local Bounti Corp is expected to under-perform the Vital Farms. But the stock apears to be less risky and, when comparing its historical volatility, Local Bounti Corp is 1.21 times less risky than Vital Farms. The stock trades about -0.53 of its potential returns per unit of risk. The Vital Farms is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 3,615 in Vital Farms on August 28, 2024 and sell it today you would lose (388.00) from holding Vital Farms or give up 10.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Local Bounti Corp vs. Vital Farms
Performance |
| Timeline |
| Local Bounti Corp |
| Vital Farms |
Local Bounti and Vital Farms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Local Bounti and Vital Farms
The main advantage of trading using opposite Local Bounti and Vital Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Local Bounti position performs unexpectedly, Vital Farms 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 Vital Farms will offset losses from the drop in Vital Farms' long position.| Local Bounti vs. Bellring Brands LLC | Local Bounti vs. Ingredion Incorporated | Local Bounti vs. Nomad Foods | Local Bounti vs. Simply Good Foods |
| Vital Farms vs. Fresh Del Monte | Vital Farms vs. Alico Inc | Vital Farms vs. SW Seed Company | Vital Farms 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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