Correlation Between Citi Trends and Highlands Bankshares

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

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

Diversification Opportunities for Citi Trends and Highlands Bankshares

0.71

Correlation Coefficient

Citi Trends  Highlands Bankshares

Poor diversification

The 3 months correlation between Citi and Highlands is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Highlands Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlands Bankshares 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 Highlands Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlands Bankshares has no effect on the direction of Citi Trends i.e., Citi Trends and Highlands Bankshares go up and down completely randomly.

Pair Corralation between Citi Trends and Highlands Bankshares

Given the investment horizon of 90 days Citi Trends is expected to generate 5.18 times more return on investment than Highlands Bankshares. However, Citi Trends is 5.18 times more volatile than Highlands Bankshares. It trades about 0.32 of its potential returns per unit of risk. Highlands Bankshares is currently generating about 0.02 per unit of risk. If you would invest  2,002  in Citi Trends on September 28, 2024 and sell it today you would earn a total of  646.00  from holding Citi Trends or generate 32.27% 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.  Highlands Bankshares

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.

Highlands Bankshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlands Bankshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Highlands Bankshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citi Trends and Highlands Bankshares

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

The idea behind Citi Trends and Highlands Bankshares 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.