Correlation Between Lichen China and All American

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

Diversification Opportunities for Lichen China and All American

0.45

Correlation Coefficient

Lichen China  All American

Very weak diversification

The 3 months correlation between Lichen and All is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and All American Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All American Pet 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 All American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All American Pet has no effect on the direction of Lichen China i.e., Lichen China and All American go up and down completely randomly.

Pair Corralation between Lichen China and All American

Given the investment horizon of 90 days Lichen China Limited is expected to under-perform the All American. But the stock apears to be less risky and, when comparing its historical volatility, Lichen China Limited is 1.38 times less risky than All American. The stock trades about -0.36 of its potential returns per unit of risk. The All American Pet is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in All American Pet on December 27, 2024 and sell it today you would lose (0.01) from holding All American Pet or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Lichen China Limited  vs.  All American Pet

Lichen China Limited

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

All American Pet

Risk-Adjusted Performance

Very Weak

Over the last 90 days All American Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 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 All American

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

The idea behind Lichen China Limited and All American Pet 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.