Correlation Between DXP Enterprises and Citi Trends

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

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

Diversification Opportunities for DXP Enterprises and Citi Trends

0.58

Correlation Coefficient

DXP Enterprises  Citi Trends

Very weak diversification

The 3 months correlation between DXP and Citi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and Citi Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citi Trends and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with Citi Trends. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citi Trends has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and Citi Trends go up and down completely randomly.

Pair Corralation between DXP Enterprises and Citi Trends

Given the investment horizon of 90 days DXP Enterprises is expected to generate 2.85 times less return on investment than Citi Trends. But when comparing it to its historical volatility, DXP Enterprises is 4.1 times less risky than Citi Trends. It trades about 0.59 of its potential returns per unit of risk. Citi Trends is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  1,683  in Citi Trends on September 16, 2024 and sell it today you would earn a total of  795.00  from holding Citi Trends or generate 47.24% return on investment over 90 days.

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

DXP Enterprises  vs.  Citi Trends

DXP Enterprises

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DXP Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.

Citi Trends

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Citi Trends are ranked lower than 14 (%) 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.

Pair Trading with DXP Enterprises and Citi Trends

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

The idea behind DXP Enterprises and Citi Trends 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 Commodity Directory module to find actively traded commodities issued by global exchanges.