Correlation Between Citi Trends and First Trust

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

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

Diversification Opportunities for Citi Trends and First Trust

0.41

Correlation Coefficient

Citi Trends  First Trust

Very weak diversification

The 3 months correlation between Citi and First is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and First Trust Flexible in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Flexible 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Flexible has no effect on the direction of Citi Trends i.e., Citi Trends and First Trust go up and down completely randomly.

Pair Corralation between Citi Trends and First Trust

Given the investment horizon of 90 days Citi Trends is expected to generate 4.89 times more return on investment than First Trust. However, Citi Trends is 4.89 times more volatile than First Trust Flexible. It trades about 0.01 of its potential returns per unit of risk. First Trust Flexible is currently generating about 0.04 per unit of risk. If you would invest  2,633  in Citi Trends on September 17, 2024 and sell it today you would lose (65.00) from holding Citi Trends or give up 2.47% of portfolio value over 90 days.

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

Citi Trends  vs.  First Trust Flexible

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 conflicting basic indicators, Citi Trends displayed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Flexible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Trust Flexible has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, First Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citi Trends and First Trust

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

The idea behind Citi Trends and First Trust Flexible 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.