Correlation Between Veralto and Lichen China

Can any of the company-specific risk be diversified away by investing in both Veralto and Lichen China 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 Veralto and Lichen China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Veralto and Lichen China Limited, you can compare the effects of market volatilities on Veralto and Lichen China 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 Veralto with a short position of Lichen China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Veralto and Lichen China.

Diversification Opportunities for Veralto and Lichen China

-0.53

Correlation Coefficient

Veralto  Lichen China

Excellent diversification

The 3 months correlation between Veralto and Lichen is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Veralto and Lichen China Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lichen China Limited and Veralto 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 Veralto are associated (or correlated) with Lichen China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lichen China Limited has no effect on the direction of Veralto i.e., Veralto and Lichen China go up and down completely randomly.

Pair Corralation between Veralto and Lichen China

Given the investment horizon of 90 days Veralto is expected to generate 3.28 times less return on investment than Lichen China. But when comparing it to its historical volatility, Veralto is 7.37 times less risky than Lichen China. It trades about 0.11 of its potential returns per unit of risk. Lichen China Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Lichen China Limited on September 4, 2024 and sell it today you would earn a total of  30.00  from holding Lichen China Limited or generate 17.14% return on investment over 90 days.

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

Veralto  vs.  Lichen China Limited

Veralto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veralto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Veralto is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lichen China Limited

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lichen China Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Lichen China displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veralto and Lichen China

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

The idea behind Veralto and Lichen China Limited 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.