Correlation Between Wilmar International and Local Bounti

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

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

Diversification Opportunities for Wilmar International and Local Bounti

0.15

Correlation Coefficient

Wilmar International  Local Bounti

Average diversification

The 3 months correlation between Wilmar and Local is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wilmar 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 Wilmar International 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 Wilmar 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 Wilmar International i.e., Wilmar International and Local Bounti go up and down completely randomly.

Pair Corralation between Wilmar International and Local Bounti

Assuming the 90 days horizon Wilmar International is expected to generate 0.44 times more return on investment than Local Bounti. However, Wilmar International is 2.26 times less risky than Local Bounti. It trades about 0.11 of its potential returns per unit of risk. Local Bounti Corp is currently generating about 0.01 per unit of risk. If you would invest  2,284  in Wilmar International on December 28, 2024 and sell it today you would earn a total of  205.00  from holding Wilmar International or generate 8.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Wilmar International  vs.  Local Bounti Corp

Wilmar International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmar International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Wilmar International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Local Bounti Corp

Risk-Adjusted Performance

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.

Pair Trading with Wilmar International and Local Bounti

The main advantage of trading using opposite Wilmar International and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmar International 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 Wilmar 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.