Correlation Between Citi Trends and Harmony Gold

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

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

Diversification Opportunities for Citi Trends and Harmony Gold

0.55

Correlation Coefficient

Citi Trends  Harmony Gold

Very weak diversification

The 3 months correlation between Citi and Harmony is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Harmony Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Gold Mining 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 Harmony Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Gold Mining has no effect on the direction of Citi Trends i.e., Citi Trends and Harmony Gold go up and down completely randomly.

Pair Corralation between Citi Trends and Harmony Gold

Given the investment horizon of 90 days Citi Trends is expected to generate 0.52 times more return on investment than Harmony Gold. However, Citi Trends is 1.91 times less risky than Harmony Gold. It trades about 0.15 of its potential returns per unit of risk. Harmony Gold Mining is currently generating about 0.07 per unit of risk. If you would invest  1,405  in Citi Trends on December 5, 2024 and sell it today you would earn a total of  1,030  from holding Citi Trends or generate 73.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.77%
Values	Daily Returns

Citi Trends  vs.  Harmony Gold Mining

Citi Trends

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citi Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Citi Trends is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Harmony Gold Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony Gold Mining are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Harmony Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citi Trends and Harmony Gold

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

The idea behind Citi Trends and Harmony Gold Mining 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.