Correlation Between Lancaster Colony and Local Bounti

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

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

Diversification Opportunities for Lancaster Colony and Local Bounti

-0.43

Correlation Coefficient

Lancaster Colony  Local Bounti

Very good diversification

The 3 months correlation between Lancaster and Local is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony 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 Lancaster Colony 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 Lancaster Colony 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 Lancaster Colony i.e., Lancaster Colony and Local Bounti go up and down completely randomly.

Pair Corralation between Lancaster Colony and Local Bounti

Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the Local Bounti. But the stock apears to be less risky and, when comparing its historical volatility, Lancaster Colony is 5.78 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 0.01 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Local Bounti Corp on September 26, 2024 and sell it today you would lose (39.00) from holding Local Bounti Corp or give up 15.48% of portfolio value over 90 days.

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

Lancaster Colony  vs.  Local Bounti Corp

Lancaster Colony

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 fragile fundamental indicators, Local Bounti disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lancaster Colony and Local Bounti

The main advantage of trading using opposite Lancaster Colony and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony 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 Lancaster Colony 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.