Correlation Between Lichen China and Unifirst

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

Diversification Opportunities for Lichen China and Unifirst

-0.18

Correlation Coefficient

Lichen China  Unifirst

Good diversification

The 3 months correlation between Lichen and Unifirst is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and Unifirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unifirst 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 Unifirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unifirst has no effect on the direction of Lichen China i.e., Lichen China and Unifirst go up and down completely randomly.

Pair Corralation between Lichen China and Unifirst

Given the investment horizon of 90 days Lichen China Limited is expected to under-perform the Unifirst. In addition to that, Lichen China is 2.47 times more volatile than Unifirst. It trades about -0.34 of its total potential returns per unit of risk. Unifirst is currently generating about 0.03 per unit of volatility. If you would invest  17,071  in Unifirst on December 29, 2024 and sell it today you would earn a total of  319.00  from holding Unifirst or generate 1.87% return on investment over 90 days.

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

Lichen China Limited  vs.  Unifirst

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.

Unifirst

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unifirst are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Unifirst is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lichen China and Unifirst

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

The idea behind Lichen China Limited and Unifirst 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.