Correlation Between Molson Coors and Local Bounti

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

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

Diversification Opportunities for Molson Coors and Local Bounti

-0.64

Correlation Coefficient

Molson Coors  Local Bounti

Excellent diversification

The 3 months correlation between Molson and Local is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing 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 Molson Coors 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 Molson Coors Brewing 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 Molson Coors i.e., Molson Coors and Local Bounti go up and down completely randomly.

Pair Corralation between Molson Coors and Local Bounti

Considering the 90-day investment horizon Molson Coors Brewing is expected to generate 0.33 times more return on investment than Local Bounti. However, Molson Coors Brewing is 3.06 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 -0.13 per unit of risk. If you would invest  5,690  in Molson Coors Brewing on September 2, 2024 and sell it today you would earn a total of  516.00  from holding Molson Coors Brewing or generate 9.07% return on investment over 90 days.

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

Molson Coors Brewing  vs.  Local Bounti Corp

Molson Coors Brewing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Molson Coors and Local Bounti

The main advantage of trading using opposite Molson Coors and Local Bounti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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 Molson Coors Brewing 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.