Correlation Between Citi Trends and National CineMedia

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

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

Diversification Opportunities for Citi Trends and National CineMedia

0.36

Correlation Coefficient

Citi Trends  National CineMedia

Weak diversification

The 3 months correlation between Citi and National is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of Citi Trends i.e., Citi Trends and National CineMedia go up and down completely randomly.

Pair Corralation between Citi Trends and National CineMedia

Given the investment horizon of 90 days Citi Trends is expected to generate 2.52 times more return on investment than National CineMedia. However, Citi Trends is 2.52 times more volatile than National CineMedia. It trades about 0.31 of its potential returns per unit of risk. National CineMedia is currently generating about -0.16 per unit of risk. If you would invest  1,957  in Citi Trends on September 25, 2024 and sell it today you would earn a total of  639.00  from holding Citi Trends or generate 32.65% return on investment over 90 days.

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

Citi Trends  vs.  National CineMedia

Citi Trends

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 13 (%) 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.

National CineMedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National CineMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Citi Trends and National CineMedia

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

The idea behind Citi Trends and National CineMedia 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 Global Correlations module to find global opportunities by holding instruments from different markets.