Correlation Between Citi Trends and Xcel Brands

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

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

Diversification Opportunities for Citi Trends and Xcel Brands

0.34

Correlation Coefficient

Citi Trends  Xcel Brands

Weak diversification

The 3 months correlation between Citi and Xcel is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Citi Trends and Xcel Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Brands 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 Xcel Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Brands has no effect on the direction of Citi Trends i.e., Citi Trends and Xcel Brands go up and down completely randomly.

Pair Corralation between Citi Trends and Xcel Brands

Given the investment horizon of 90 days Citi Trends is expected to generate 0.38 times more return on investment than Xcel Brands. However, Citi Trends is 2.64 times less risky than Xcel Brands. It trades about -0.04 of its potential returns per unit of risk. Xcel Brands is currently generating about -0.08 per unit of risk. If you would invest  2,441  in Citi Trends on December 18, 2024 and sell it today you would lose (287.00) from holding Citi Trends or give up 11.76% of portfolio value over 90 days.

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

Citi Trends  vs.  Xcel Brands

Citi Trends

Risk-Adjusted Performance

Very Weak

Over the last 90 days Citi Trends has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Xcel Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xcel Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Citi Trends and Xcel Brands

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

The idea behind Citi Trends and Xcel Brands 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.