Correlation Between Lichen China and Maximus

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

By analyzing existing cross correlation between Lichen China Limited and Maximus, you can compare the effects of market volatilities on Lichen China and Maximus 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 Lichen China with a short position of Maximus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lichen China and Maximus.

Diversification Opportunities for Lichen China and Maximus

0.41

Correlation Coefficient

Lichen China  Maximus

Very weak diversification

The 3 months correlation between Lichen and Maximus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus and Lichen China 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 Lichen China Limited are associated (or correlated) with Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of Lichen China i.e., Lichen China and Maximus go up and down completely randomly.

Pair Corralation between Lichen China and Maximus

Given the investment horizon of 90 days Lichen China Limited is expected to under-perform the Maximus. In addition to that, Lichen China is 6.32 times more volatile than Maximus. It trades about 0.0 of its total potential returns per unit of risk. Maximus is currently generating about 0.01 per unit of volatility. If you would invest  7,154  in Maximus on September 13, 2024 and sell it today you would lose (48.00) from holding Maximus or give up 0.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.33%
Values	Daily Returns

Lichen China Limited  vs.  Maximus

Lichen China Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lichen China Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Maximus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lichen China and Maximus

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

The idea behind Lichen China Limited and Maximus 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.