Correlation Between Village Farms and Local Bounti

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

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

Diversification Opportunities for Village Farms and Local Bounti

-0.46

Correlation Coefficient

Village Farms  Local Bounti

Very good diversification

The 3 months correlation between Village and Local is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Village Farms International 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 Village Farms 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 Village Farms International 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 Village Farms i.e., Village Farms and Local Bounti go up and down completely randomly.

Pair Corralation between Village Farms and Local Bounti

Considering the 90-day investment horizon Village Farms International is expected to under-perform the Local Bounti. But the stock apears to be less risky and, when comparing its historical volatility, Village Farms International is 1.05 times less risky than Local Bounti. The stock trades about 0.0 of its potential returns per unit of risk. The Local Bounti Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  176.00  in Local Bounti Corp on December 19, 2024 and sell it today you would earn a total of  13.00  from holding Local Bounti Corp or generate 7.39% return on investment over 90 days.

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

Village Farms International  vs.  Local Bounti Corp

Village Farms Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Village Farms is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Local Bounti Corp

Risk-Adjusted Performance

Modest

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 Village Farms and Local Bounti

The main advantage of trading using opposite Village Farms and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Village Farms 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 Village Farms International 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.