Correlation Between Citi Trends and Tandy Leather

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

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

Diversification Opportunities for Citi Trends and Tandy Leather

0.31

Correlation Coefficient

Citi Trends  Tandy Leather

Weak diversification

The 3 months correlation between Citi and Tandy is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Tandy Leather Factory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandy Leather Factory 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 Tandy Leather. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandy Leather Factory has no effect on the direction of Citi Trends i.e., Citi Trends and Tandy Leather go up and down completely randomly.

Pair Corralation between Citi Trends and Tandy Leather

Given the investment horizon of 90 days Citi Trends is expected to generate 1.35 times more return on investment than Tandy Leather. However, Citi Trends is 1.35 times more volatile than Tandy Leather Factory. It trades about 0.05 of its potential returns per unit of risk. Tandy Leather Factory is currently generating about 0.03 per unit of risk. If you would invest  2,154  in Citi Trends on September 12, 2024 and sell it today you would earn a total of  345.00  from holding Citi Trends or generate 16.02% 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.  Tandy Leather Factory

Citi Trends

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 17 (%) 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.

Tandy Leather Factory

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tandy Leather Factory are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Tandy Leather reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citi Trends and Tandy Leather

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

The idea behind Citi Trends and Tandy Leather Factory 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.