Correlation Between Vital Farms and Local Bounti
Can any of the company-specific risk be diversified away by investing in both Vital Farms 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 Vital Farms and Local Bounti into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vital Farms and Local Bounti Corp, you can compare the effects of market volatilities on Vital Farms 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 Vital Farms with a short position of Local Bounti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vital Farms and Local Bounti.
Diversification Opportunities for Vital Farms and Local Bounti
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vital and Local is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Vital Farms 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 Vital Farms 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 Vital Farms 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 Vital Farms i.e., Vital Farms and Local Bounti go up and down completely randomly.
Pair Corralation between Vital Farms and Local Bounti
Given the investment horizon of 90 days Vital Farms is expected to generate 1.21 times more return on investment than Local Bounti. However, Vital Farms is 1.21 times more volatile than Local Bounti Corp. It trades about -0.1 of its potential returns per unit of risk. Local Bounti Corp is currently generating about -0.53 per unit of risk. 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 |
Vital Farms vs. Local Bounti Corp
Performance |
| Timeline |
| Vital Farms |
| Local Bounti Corp |
Vital Farms and Local Bounti Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vital Farms and Local Bounti
The main advantage of trading using opposite Vital Farms and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vital Farms 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.| Vital Farms vs. Fresh Del Monte | Vital Farms vs. Alico Inc | Vital Farms vs. SW Seed Company | Vital Farms vs. Adecoagro SA |
| Local Bounti vs. Bellring Brands LLC | Local Bounti vs. Ingredion Incorporated | Local Bounti vs. Nomad Foods | Local Bounti vs. Simply Good Foods |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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