Correlation Between Citi Trends and Seadrill

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

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

Diversification Opportunities for Citi Trends and Seadrill

-0.06

Correlation Coefficient

Citi Trends  Seadrill

Good diversification

The 3 months correlation between Citi and Seadrill is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited 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 Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Citi Trends i.e., Citi Trends and Seadrill go up and down completely randomly.

Pair Corralation between Citi Trends and Seadrill

Given the investment horizon of 90 days Citi Trends is expected to generate 1.45 times more return on investment than Seadrill. However, Citi Trends is 1.45 times more volatile than Seadrill Limited. It trades about 0.04 of its potential returns per unit of risk. Seadrill Limited is currently generating about -0.07 per unit of risk. If you would invest  2,199  in Citi Trends on September 15, 2024 and sell it today you would earn a total of  279.00  from holding Citi Trends or generate 12.69% return on investment over 90 days.

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

Citi Trends  vs.  Seadrill Limited

Citi Trends

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Citi Trends displayed solid returns over the last few months and may actually be approaching a breakup point.

Seadrill Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seadrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Seadrill is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citi Trends and Seadrill

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

The idea behind Citi Trends and Seadrill Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .