Correlation Between Rev and Citi Trends

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

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

Diversification Opportunities for Rev and Citi Trends

-0.54

Correlation Coefficient

Rev  Citi Trends

Excellent diversification

The 3 months correlation between Rev and Citi is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Rev Group and Citi Trends in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citi Trends and Rev 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 Rev Group 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 Rev i.e., Rev and Citi Trends go up and down completely randomly.

Pair Corralation between Rev and Citi Trends

Given the investment horizon of 90 days Rev Group is expected to generate 0.65 times more return on investment than Citi Trends. However, Rev Group is 1.53 times less risky than Citi Trends. It trades about 0.08 of its potential returns per unit of risk. Citi Trends is currently generating about 0.01 per unit of risk. If you would invest  957.00  in Rev Group on January 29, 2024 and sell it today you would earn a total of  1,167  from holding Rev Group or generate 121.94% return on investment over 90 days.

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

Rev Group  vs.  Citi Trends

Rev Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rev Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Rev reported solid returns over the last few months and may actually be approaching a breakup point.

Citi Trends

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rev and Citi Trends

The main advantage of trading using opposite Rev and Citi Trends positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rev 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 Rev Group 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.