Correlation Between Ross Stores and Citi Trends

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

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

Diversification Opportunities for Ross Stores and Citi Trends

-0.36

Correlation Coefficient

Ross Stores  Citi Trends

Very good diversification

The 3 months correlation between Ross and Citi is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Citi Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citi Trends and Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and Citi Trends go up and down completely randomly.

Pair Corralation between Ross Stores and Citi Trends

Given the investment horizon of 90 days Ross Stores is expected to generate 0.45 times more return on investment than Citi Trends. However, Ross Stores is 2.22 times less risky than Citi Trends. It trades about 0.05 of its potential returns per unit of risk. Citi Trends is currently generating about -0.03 per unit of risk. If you would invest  14,362  in Ross Stores on September 3, 2024 and sell it today you would earn a total of  1,125  from holding Ross Stores or generate 7.83% return on investment over 90 days.

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

Ross Stores  vs.  Citi Trends

Ross Stores

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Citi Trends

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Citi Trends displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ross Stores and Citi Trends

The main advantage of trading using opposite Ross Stores and Citi Trends positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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 Ross Stores 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.