Correlation Between Frontera and Lichen China

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

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

Diversification Opportunities for Frontera and Lichen China

0.0

Correlation Coefficient

Frontera  Lichen China

Pay attention - limited upside

The 3 months correlation between Frontera and Lichen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Frontera Group 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 Frontera 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 Frontera Group 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 Frontera i.e., Frontera and Lichen China go up and down completely randomly.

Pair Corralation between Frontera and Lichen China

If you would invest  17.00  in Lichen China Limited on December 20, 2024 and sell it today you would earn a total of  394.00  from holding Lichen China Limited or generate 2317.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Frontera Group  vs.  Lichen China Limited

Frontera Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frontera Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Frontera is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lichen China Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lichen China Limited are ranked lower than 8 (%) 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.

Pair Trading with Frontera and Lichen China

The main advantage of trading using opposite Frontera and Lichen China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Frontera 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 Frontera Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.