Correlation Between Citi Trends and Summit Materials

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

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

Diversification Opportunities for Citi Trends and Summit Materials

0.5

Correlation Coefficient

Citi Trends  Summit Materials

Very weak diversification

The 3 months correlation between Citi and Summit is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Citi Trends i.e., Citi Trends and Summit Materials go up and down completely randomly.

Pair Corralation between Citi Trends and Summit Materials

Given the investment horizon of 90 days Citi Trends is expected to generate 4.09 times more return on investment than Summit Materials. However, Citi Trends is 4.09 times more volatile than Summit Materials. It trades about 0.2 of its potential returns per unit of risk. Summit Materials is currently generating about 0.24 per unit of risk. If you would invest  2,441  in Citi Trends on October 13, 2024 and sell it today you would earn a total of  199.00  from holding Citi Trends or generate 8.15% return on investment over 90 days.

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

Citi Trends  vs.  Summit Materials

Citi Trends

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 12 (%) 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.

Summit Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citi Trends and Summit Materials

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

The idea behind Citi Trends and Summit Materials 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.