Correlation Between Wilhelmina and Lichen China

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

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

Diversification Opportunities for Wilhelmina and Lichen China

-0.06

Correlation Coefficient

Wilhelmina  Lichen China

Good diversification

The 3 months correlation between Wilhelmina and Lichen is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Wilhelmina 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 Wilhelmina 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 Wilhelmina 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 Wilhelmina i.e., Wilhelmina and Lichen China go up and down completely randomly.

Pair Corralation between Wilhelmina and Lichen China

Given the investment horizon of 90 days Wilhelmina is expected to under-perform the Lichen China. But the stock apears to be less risky and, when comparing its historical volatility, Wilhelmina is 1.11 times less risky than Lichen China. The stock trades about -0.07 of its potential returns per unit of risk. The Lichen China Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wilhelmina  vs.  Lichen China Limited

Wilhelmina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilhelmina has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Wilhelmina and Lichen China

The main advantage of trading using opposite Wilhelmina and Lichen China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilhelmina 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 Wilhelmina 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.