Correlation Between Cal Maine and Local Bounti

Can any of the company-specific risk be diversified away by investing in both Cal Maine 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 Cal Maine and Local Bounti into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cal Maine Foods and Local Bounti Corp, you can compare the effects of market volatilities on Cal Maine 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 Cal Maine with a short position of Local Bounti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cal Maine and Local Bounti.

Diversification Opportunities for Cal Maine and Local Bounti

-0.12

Correlation Coefficient

Cal Maine  Local Bounti

Good diversification

The 3 months correlation between Cal and Local is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Cal Maine Foods 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 Cal Maine 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 Cal Maine Foods 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 Cal Maine i.e., Cal Maine and Local Bounti go up and down completely randomly.

Pair Corralation between Cal Maine and Local Bounti

Given the investment horizon of 90 days Cal Maine Foods is expected to under-perform the Local Bounti. In addition to that, Cal Maine is 1.04 times more volatile than Local Bounti Corp. It trades about -0.02 of its total potential returns per unit of risk. Local Bounti Corp is currently generating about 0.04 per unit of volatility. If you would invest  204.00  in Local Bounti Corp on December 27, 2024 and sell it today you would earn a total of  11.00  from holding Local Bounti Corp or generate 5.39% return on investment over 90 days.

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

Cal Maine Foods  vs.  Local Bounti Corp

Cal Maine Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cal Maine Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Cal Maine is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Local Bounti Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Local Bounti Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Local Bounti may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Cal Maine and Local Bounti

The main advantage of trading using opposite Cal Maine and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cal Maine 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 Cal Maine Foods 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..