Correlation Between Citi Trends and NEXT Plc

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

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

Diversification Opportunities for Citi Trends and NEXT Plc

0.94

Correlation Coefficient

Citi Trends  NEXT Plc

Almost no diversification

The 3 months correlation between Citi and NEXT is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc 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 NEXT Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXT plc has no effect on the direction of Citi Trends i.e., Citi Trends and NEXT Plc go up and down completely randomly.

Pair Corralation between Citi Trends and NEXT Plc

Given the investment horizon of 90 days Citi Trends is expected to generate 2.16 times less return on investment than NEXT Plc. In addition to that, Citi Trends is 1.19 times more volatile than NEXT plc. It trades about 0.03 of its total potential returns per unit of risk. NEXT plc is currently generating about 0.07 per unit of volatility. If you would invest  8,392  in NEXT plc on September 28, 2024 and sell it today you would earn a total of  3,949  from holding NEXT plc or generate 47.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

Citi Trends  vs.  NEXT plc

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.

NEXT plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEXT plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NEXT Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Citi Trends and NEXT Plc

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

The idea behind Citi Trends and NEXT plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.