Correlation Between Citi Trends and NISOURCE

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

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

Diversification Opportunities for Citi Trends and NISOURCE

-0.81

Correlation Coefficient

Citi Trends  NISOURCE

Pay attention - limited upside

The 3 months correlation between Citi and NISOURCE is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and NISOURCE FIN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISOURCE FIN P 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 NISOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISOURCE FIN P has no effect on the direction of Citi Trends i.e., Citi Trends and NISOURCE go up and down completely randomly.

Pair Corralation between Citi Trends and NISOURCE

Given the investment horizon of 90 days Citi Trends is expected to generate 58.15 times less return on investment than NISOURCE. But when comparing it to its historical volatility, Citi Trends is 15.45 times less risky than NISOURCE. It trades about 0.01 of its potential returns per unit of risk. NISOURCE FIN P is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,468  in NISOURCE FIN P on September 23, 2024 and sell it today you would earn a total of  90.00  from holding NISOURCE FIN P or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.34%
Values	Daily Returns

Citi Trends  vs.  NISOURCE FIN P

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 unfluctuating basic indicators, Citi Trends displayed solid returns over the last few months and may actually be approaching a breakup point.

NISOURCE FIN P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NISOURCE FIN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NISOURCE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Citi Trends and NISOURCE

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

The idea behind Citi Trends and NISOURCE FIN P 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.