Correlation Between Local Bounti and Alico

Can any of the company-specific risk be diversified away by investing in both Local Bounti and Alico 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 Alico 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 Alico Inc, you can compare the effects of market volatilities on Local Bounti and Alico 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 Alico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Local Bounti and Alico.

Diversification Opportunities for Local Bounti and Alico

0.26

Correlation Coefficient

Local Bounti  Alico

Modest diversification

The 3 months correlation between Local and Alico is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Local Bounti Corp and Alico Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alico Inc 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 Alico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alico Inc has no effect on the direction of Local Bounti i.e., Local Bounti and Alico go up and down completely randomly.

Pair Corralation between Local Bounti and Alico

Given the investment horizon of 90 days Local Bounti is expected to generate 3.64 times less return on investment than Alico. In addition to that, Local Bounti is 1.06 times more volatile than Alico Inc. It trades about 0.03 of its total potential returns per unit of risk. Alico Inc is currently generating about 0.1 per unit of volatility. If you would invest  2,548  in Alico Inc on December 28, 2024 and sell it today you would earn a total of  444.00  from holding Alico Inc or generate 17.43% return on investment over 90 days.

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

Local Bounti Corp  vs.  Alico Inc

Local Bounti Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Local Bounti Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Local Bounti is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Alico Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Alico displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Local Bounti and Alico

The main advantage of trading using opposite Local Bounti and Alico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Local Bounti position performs unexpectedly, Alico 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 Alico will offset losses from the drop in Alico's long position.

The idea behind Local Bounti Corp and Alico Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.