Correlation Between Lichen China and Rentokil Initial
Can any of the company-specific risk be diversified away by investing in both Lichen China and Rentokil Initial 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 Rentokil Initial 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 Rentokil Initial PLC, you can compare the effects of market volatilities on Lichen China and Rentokil Initial 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 Rentokil Initial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lichen China and Rentokil Initial.
Diversification Opportunities for Lichen China and Rentokil Initial
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lichen and Rentokil is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lichen China Limited and Rentokil Initial PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rentokil Initial PLC 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 Rentokil Initial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rentokil Initial PLC has no effect on the direction of Lichen China i.e., Lichen China and Rentokil Initial go up and down completely randomly.
Pair Corralation between Lichen China and Rentokil Initial
Given the investment horizon of 90 days Lichen China Limited is expected to generate 3.49 times more return on investment than Rentokil Initial. However, Lichen China is 3.49 times more volatile than Rentokil Initial PLC. It trades about 0.06 of its potential returns per unit of risk. Rentokil Initial PLC is currently generating about 0.02 per unit of risk. If you would invest 142.00 in Lichen China Limited on August 28, 2024 and sell it today you would earn a total of 42.00 from holding Lichen China Limited or generate 29.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lichen China Limited vs. Rentokil Initial PLC
Performance |
| Timeline |
| Lichen China Limited |
| Rentokil Initial PLC |
Lichen China and Rentokil Initial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lichen China and Rentokil Initial
The main advantage of trading using opposite Lichen China and Rentokil Initial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lichen China position performs unexpectedly, Rentokil Initial 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 Rentokil Initial will offset losses from the drop in Rentokil Initial's long position.| Lichen China vs. Genpact Limited | Lichen China vs. Broadridge Financial Solutions | Lichen China vs. First Advantage Corp | Lichen China vs. Franklin Covey |
| Rentokil Initial vs. Genpact Limited | Rentokil Initial vs. Broadridge Financial Solutions | Rentokil Initial vs. First Advantage Corp | Rentokil Initial vs. Franklin Covey |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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