Correlation Between Mader Group and Lichen China
Can any of the company-specific risk be diversified away by investing in both Mader Group 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 Mader Group and Lichen China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mader Group Limited and Lichen China Limited, you can compare the effects of market volatilities on Mader Group 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 Mader Group with a short position of Lichen China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mader Group and Lichen China.
Diversification Opportunities for Mader Group and Lichen China
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mader and Lichen is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mader Group Limited 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 Mader Group 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 Mader Group Limited 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 Mader Group i.e., Mader Group and Lichen China go up and down completely randomly.
Pair Corralation between Mader Group and Lichen China
Assuming the 90 days horizon Mader Group Limited is expected to generate 0.29 times more return on investment than Lichen China. However, Mader Group Limited is 3.43 times less risky than Lichen China. It trades about 0.22 of its potential returns per unit of risk. Lichen China Limited is currently generating about -0.36 per unit of risk. If you would invest 357.00 in Mader Group Limited on November 9, 2024 and sell it today you would earn a total of 43.00 from holding Mader Group Limited or generate 12.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mader Group Limited vs. Lichen China Limited
Performance |
| Timeline |
| Mader Group Limited |
| Lichen China Limited |
Mader Group and Lichen China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mader Group and Lichen China
The main advantage of trading using opposite Mader Group and Lichen China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mader Group 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.| Mader Group vs. Cintas | Mader Group vs. Thomson Reuters Corp | Mader Group vs. Global Payments | Mader Group vs. Wolters Kluwer NV |
| Lichen China vs. First Advantage Corp | Lichen China vs. Discount Print USA | Lichen China vs. Cass Information Systems | Lichen China vs. Civeo Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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