Correlation Between Local Bounti and Wilmar International

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

Diversification Opportunities for Local Bounti and Wilmar International

0.62

Correlation Coefficient

Local Bounti  Wilmar International

Poor diversification

The 3 months correlation between Local and Wilmar is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Local Bounti Corp and Wilmar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of Local Bounti i.e., Local Bounti and Wilmar International go up and down completely randomly.

Pair Corralation between Local Bounti and Wilmar International

Given the investment horizon of 90 days Local Bounti Corp is expected to under-perform the Wilmar International. In addition to that, Local Bounti is 1.9 times more volatile than Wilmar International. It trades about -0.13 of its total potential returns per unit of risk. Wilmar International is currently generating about -0.03 per unit of volatility. If you would invest  2,383  in Wilmar International on August 31, 2024 and sell it today you would lose (118.00) from holding Wilmar International or give up 4.95% of portfolio value over 90 days.

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

Local Bounti Corp  vs.  Wilmar International

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.

Wilmar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmar International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Wilmar International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Local Bounti and Wilmar International

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

The idea behind Local Bounti Corp and Wilmar International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.