Correlation Between Lichen China and Frontera

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

Diversification Opportunities for Lichen China and Frontera

0.0

Correlation Coefficient

Lichen China  Frontera

Pay attention - limited upside

The 3 months correlation between Lichen and Frontera is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and Frontera Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontera Group 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 Frontera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontera Group has no effect on the direction of Lichen China i.e., Lichen China and Frontera go up and down completely randomly.

Pair Corralation between Lichen China and Frontera

If you would invest  0.01  in Frontera Group on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Frontera Group or generate 0.0% return on investment over 90 days.

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

Lichen China Limited  vs.  Frontera Group

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.

Frontera Group

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Lichen China and Frontera

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

The idea behind Lichen China Limited and Frontera Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.