Correlation Between Fresh Del and Local Bounti

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

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

Diversification Opportunities for Fresh Del and Local Bounti

-0.57

Correlation Coefficient

Fresh Del  Local Bounti

Excellent diversification

The 3 months correlation between Fresh and Local is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte 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 Fresh Del 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 Fresh Del Monte 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 Fresh Del i.e., Fresh Del and Local Bounti go up and down completely randomly.

Pair Corralation between Fresh Del and Local Bounti

Considering the 90-day investment horizon Fresh Del Monte is expected to generate 0.69 times more return on investment than Local Bounti. However, Fresh Del Monte is 1.45 times less risky than Local Bounti. It trades about 0.31 of its potential returns per unit of risk. Local Bounti Corp is currently generating about -0.46 per unit of risk. If you would invest  2,888  in Fresh Del Monte on August 30, 2024 and sell it today you would earn a total of  509.00  from holding Fresh Del Monte or generate 17.62% return on investment over 90 days.

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

Fresh Del Monte  vs.  Local Bounti Corp

Fresh Del Monte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Fresh Del reported solid returns over the last few months and may actually be approaching a breakup point.

Local Bounti Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Local Bounti Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Fresh Del and Local Bounti

The main advantage of trading using opposite Fresh Del and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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 Fresh Del Monte 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.