Correlation Between Lichen China and SP Plus

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

Diversification Opportunities for Lichen China and SP Plus

0.1

Correlation Coefficient

Lichen China  SP Plus

Average diversification

The 3 months correlation between Lichen and SP Plus is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and SP Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Plus Corp 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 SP Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Plus Corp has no effect on the direction of Lichen China i.e., Lichen China and SP Plus go up and down completely randomly.

Pair Corralation between Lichen China and SP Plus

If you would invest  193.00  in Lichen China Limited on September 2, 2024 and sell it today you would lose (6.00) from holding Lichen China Limited or give up 3.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Lichen China Limited  vs.  SP Plus Corp

Lichen China Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lichen China Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Lichen China may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SP Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, SP Plus is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Lichen China and SP Plus

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

The idea behind Lichen China Limited and SP Plus Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.