Correlation Between Local Bounti and Golden Agri-Resources

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

Diversification Opportunities for Local Bounti and Golden Agri-Resources

-0.07

Correlation Coefficient

Local Bounti  Golden Agri-Resources

Good diversification

The 3 months correlation between Local and Golden is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Local Bounti Corp and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources 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 Golden Agri-Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of Local Bounti i.e., Local Bounti and Golden Agri-Resources go up and down completely randomly.

Pair Corralation between Local Bounti and Golden Agri-Resources

Given the investment horizon of 90 days Local Bounti is expected to generate 13.22 times less return on investment than Golden Agri-Resources. But when comparing it to its historical volatility, Local Bounti Corp is 2.47 times less risky than Golden Agri-Resources. It trades about 0.01 of its potential returns per unit of risk. Golden Agri Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Golden Agri Resources on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Golden Agri Resources or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Local Bounti Corp  vs.  Golden Agri Resources

Local Bounti Corp

Risk-Adjusted Performance

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 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.

Golden Agri Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Agri Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Golden Agri-Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Local Bounti and Golden Agri-Resources

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

The idea behind Local Bounti Corp and Golden Agri Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.