Correlation Between Aritzia and T.J. Maxx

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

By analyzing existing cross correlation between Aritzia and The TJX Companies, you can compare the effects of market volatilities on Aritzia and T.J. Maxx 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 Aritzia with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aritzia and T.J. Maxx.

Diversification Opportunities for Aritzia and T.J. Maxx

0.29

Correlation Coefficient

Aritzia  T.J. Maxx

Modest diversification

The 3 months correlation between Aritzia and T.J. is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aritzia and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Aritzia 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 Aritzia are associated (or correlated) with T.J. Maxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TJX Companies has no effect on the direction of Aritzia i.e., Aritzia and T.J. Maxx go up and down completely randomly.

Pair Corralation between Aritzia and T.J. Maxx

Assuming the 90 days horizon Aritzia is expected to generate 3.49 times more return on investment than T.J. Maxx. However, Aritzia is 3.49 times more volatile than The TJX Companies. It trades about 0.08 of its potential returns per unit of risk. The TJX Companies is currently generating about 0.07 per unit of risk. If you would invest  2,795  in Aritzia on October 13, 2024 and sell it today you would earn a total of  1,198  from holding Aritzia or generate 42.86% return on investment over 90 days.

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

Aritzia  vs.  The TJX Companies

Aritzia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aritzia reported solid returns over the last few months and may actually be approaching a breakup point.

TJX Companies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The TJX Companies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward-looking indicators, T.J. Maxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aritzia and T.J. Maxx

The main advantage of trading using opposite Aritzia and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aritzia position performs unexpectedly, T.J. Maxx 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 T.J. Maxx will offset losses from the drop in T.J. Maxx's long position.

The idea behind Aritzia and The TJX Companies 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.