Correlation Between Local Bounti and AppHarvest

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

Diversification Opportunities for Local Bounti and AppHarvest

0.0

Correlation Coefficient

Local Bounti  AppHarvest

Pay attention - limited upside

The 3 months correlation between Local and AppHarvest is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Local Bounti Corp and AppHarvest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AppHarvest 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 AppHarvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AppHarvest has no effect on the direction of Local Bounti i.e., Local Bounti and AppHarvest go up and down completely randomly.

Pair Corralation between Local Bounti and AppHarvest

If you would invest  252.00  in Local Bounti Corp on October 26, 2024 and sell it today you would lose (24.00) from holding Local Bounti Corp or give up 9.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

Local Bounti Corp  vs.  AppHarvest

Local Bounti Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Local Bounti Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Local Bounti disclosed solid returns over the last few months and may actually be approaching a breakup point.

AppHarvest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AppHarvest has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, AppHarvest is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Local Bounti and AppHarvest

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

The idea behind Local Bounti Corp and AppHarvest 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.