Correlation Between Lichen China and Cass Information

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

Diversification Opportunities for Lichen China and Cass Information

0.25

Correlation Coefficient

Lichen China  Cass Information

Modest diversification

The 3 months correlation between Lichen and Cass is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems 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 Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Lichen China i.e., Lichen China and Cass Information go up and down completely randomly.

Pair Corralation between Lichen China and Cass Information

Given the investment horizon of 90 days Lichen China Limited is expected to under-perform the Cass Information. In addition to that, Lichen China is 5.0 times more volatile than Cass Information Systems. It trades about -0.01 of its total potential returns per unit of risk. Cass Information Systems is currently generating about 0.0 per unit of volatility. If you would invest  4,552  in Cass Information Systems on October 11, 2024 and sell it today you would lose (403.00) from holding Cass Information Systems or give up 8.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Lichen China Limited  vs.  Cass Information Systems

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

Cass Information Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cass Information Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cass Information is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Lichen China and Cass Information

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

The idea behind Lichen China Limited and Cass Information Systems 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.