Correlation Between Carters and Citi Trends

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

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

Diversification Opportunities for Carters and Citi Trends

-0.15

Correlation Coefficient

Carters  Citi Trends

Good diversification

The 3 months correlation between Carters and Citi is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Carters and Citi Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citi Trends and Carters 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 Carters are associated (or correlated) with Citi Trends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citi Trends has no effect on the direction of Carters i.e., Carters and Citi Trends go up and down completely randomly.

Pair Corralation between Carters and Citi Trends

Considering the 90-day investment horizon Carters is expected to under-perform the Citi Trends. But the stock apears to be less risky and, when comparing its historical volatility, Carters is 1.64 times less risky than Citi Trends. The stock trades about -0.03 of its potential returns per unit of risk. The Citi Trends is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,967  in Citi Trends on September 29, 2024 and sell it today you would lose (282.00) from holding Citi Trends or give up 9.5% of portfolio value over 90 days.

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

Carters  vs.  Citi Trends

Carters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Citi Trends

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Citi Trends displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carters and Citi Trends

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

The idea behind Carters and Citi Trends 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.