Correlation Between Maximus and Lichen China

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

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

Diversification Opportunities for Maximus and Lichen China

0.33

Correlation Coefficient

Maximus  Lichen China

Weak diversification

The 3 months correlation between Maximus and Lichen is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Maximus and Lichen China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lichen China Limited and Maximus 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 Maximus are associated (or correlated) with Lichen China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lichen China Limited has no effect on the direction of Maximus i.e., Maximus and Lichen China go up and down completely randomly.

Pair Corralation between Maximus and Lichen China

Considering the 90-day investment horizon Maximus is expected to generate 0.13 times more return on investment than Lichen China. However, Maximus is 7.54 times less risky than Lichen China. It trades about -0.46 of its potential returns per unit of risk. Lichen China Limited is currently generating about -0.34 per unit of risk. If you would invest  9,117  in Maximus on September 12, 2024 and sell it today you would lose (2,011) from holding Maximus or give up 22.06% of portfolio value over 90 days.

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

Maximus  vs.  Lichen China Limited

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.

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.

Pair Trading with Maximus and Lichen China

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

The idea behind Maximus and Lichen China Limited 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.