Correlation Between Victorias Secret and Citi Trends

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

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

Diversification Opportunities for Victorias Secret and Citi Trends

0.71

Correlation Coefficient

Victorias Secret  Citi Trends

Poor diversification

The 3 months correlation between Victorias and Citi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Victorias Secret Co and Citi Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citi Trends and Victorias Secret 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 Victorias Secret Co 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 Victorias Secret i.e., Victorias Secret and Citi Trends go up and down completely randomly.

Pair Corralation between Victorias Secret and Citi Trends

Given the investment horizon of 90 days Victorias Secret Co is expected to generate 0.87 times more return on investment than Citi Trends. However, Victorias Secret Co is 1.16 times less risky than Citi Trends. It trades about 0.38 of its potential returns per unit of risk. Citi Trends is currently generating about 0.22 per unit of risk. If you would invest  2,352  in Victorias Secret Co on September 13, 2024 and sell it today you would earn a total of  2,373  from holding Victorias Secret Co or generate 100.89% return on investment over 90 days.

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

Victorias Secret Co  vs.  Citi Trends

Victorias Secret

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Victorias Secret Co are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Victorias Secret displayed solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with Victorias Secret and Citi Trends

The main advantage of trading using opposite Victorias Secret and Citi Trends positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victorias Secret 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 Victorias Secret Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.