Correlation Between Dole PLC and Local Bounti

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

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

Diversification Opportunities for Dole PLC and Local Bounti

0.42

Correlation Coefficient

Dole PLC  Local Bounti

Very weak diversification

The 3 months correlation between Dole and Local is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dole PLC 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 Dole PLC 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 Dole PLC 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 Dole PLC i.e., Dole PLC and Local Bounti go up and down completely randomly.

Pair Corralation between Dole PLC and Local Bounti

Given the investment horizon of 90 days Dole PLC is expected to generate 0.72 times more return on investment than Local Bounti. However, Dole PLC is 1.4 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 -0.43 per unit of risk. If you would invest  1,615  in Dole PLC on September 1, 2024 and sell it today you would lose (108.00) from holding Dole PLC or give up 6.69% of portfolio value over 90 days.

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

Dole PLC  vs.  Local Bounti Corp

Dole PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dole PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Dole PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Local Bounti Corp

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Dole PLC and Local Bounti

The main advantage of trading using opposite Dole PLC and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dole PLC 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 Dole PLC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.