Correlation Between Citi Trends and COVANTA

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

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

Diversification Opportunities for Citi Trends and COVANTA

-0.51

Correlation Coefficient

Citi Trends  COVANTA

Excellent diversification

The 3 months correlation between Citi and COVANTA is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and COVANTA HLDG P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COVANTA HLDG P and Citi Trends 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 Citi Trends are associated (or correlated) with COVANTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COVANTA HLDG P has no effect on the direction of Citi Trends i.e., Citi Trends and COVANTA go up and down completely randomly.

Pair Corralation between Citi Trends and COVANTA

Given the investment horizon of 90 days Citi Trends is expected to generate 15.95 times less return on investment than COVANTA. But when comparing it to its historical volatility, Citi Trends is 18.19 times less risky than COVANTA. It trades about 0.05 of its potential returns per unit of risk. COVANTA HLDG P is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,472  in COVANTA HLDG P on September 30, 2024 and sell it today you would lose (437.00) from holding COVANTA HLDG P or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.96%
Values	Daily Returns

Citi Trends  vs.  COVANTA HLDG P

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.

COVANTA HLDG P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COVANTA HLDG P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for COVANTA HLDG P investors.

Pair Trading with Citi Trends and COVANTA

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

The idea behind Citi Trends and COVANTA HLDG P 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.