Correlation Between Citi Trends and Alphabet

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

By analyzing existing cross correlation between Citi Trends and Alphabet Inc Class A, you can compare the effects of market volatilities on Citi Trends and Alphabet 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 Alphabet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citi Trends and Alphabet.

Diversification Opportunities for Citi Trends and Alphabet

0.67

Correlation Coefficient

Citi Trends  Alphabet

Poor diversification

The 3 months correlation between Citi and Alphabet is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Alphabet Inc Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class A 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class A has no effect on the direction of Citi Trends i.e., Citi Trends and Alphabet go up and down completely randomly.

Pair Corralation between Citi Trends and Alphabet

Given the investment horizon of 90 days Citi Trends is expected to generate 4.58 times less return on investment than Alphabet. In addition to that, Citi Trends is 1.66 times more volatile than Alphabet Inc Class A. It trades about 0.01 of its total potential returns per unit of risk. Alphabet Inc Class A is currently generating about 0.09 per unit of volatility. If you would invest  8,880  in Alphabet Inc Class A on September 24, 2024 and sell it today you would earn a total of  10,555  from holding Alphabet Inc Class A or generate 118.86% return on investment over 90 days.

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

Citi Trends  vs.  Alphabet Inc Class A

Citi Trends

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 12 (%) 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.

Alphabet Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Alphabet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citi Trends and Alphabet

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

The idea behind Citi Trends and Alphabet Inc Class A 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..