Correlation Between Lichen China and Team

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

Diversification Opportunities for Lichen China and Team

-0.1

Correlation Coefficient

Lichen China  Team

Good diversification

The 3 months correlation between Lichen and Team is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and Team Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Team Inc 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 Team. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Team Inc has no effect on the direction of Lichen China i.e., Lichen China and Team go up and down completely randomly.

Pair Corralation between Lichen China and Team

Given the investment horizon of 90 days Lichen China is expected to generate 1.08 times less return on investment than Team. But when comparing it to its historical volatility, Lichen China Limited is 1.32 times less risky than Team. It trades about 0.05 of its potential returns per unit of risk. Team Inc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,803  in Team Inc on September 5, 2024 and sell it today you would lose (8.00) from holding Team Inc or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Lichen China Limited  vs.  Team Inc

Lichen China Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lichen China Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lichen China displayed solid returns over the last few months and may actually be approaching a breakup point.

Team Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Team Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Team demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lichen China and Team

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

The idea behind Lichen China Limited and Team Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.