Correlation Between Brilliant Earth and T.J. Maxx

Can any of the company-specific risk be diversified away by investing in both Brilliant Earth 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 Brilliant Earth 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 Brilliant Earth Group and The TJX Companies, you can compare the effects of market volatilities on Brilliant Earth 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 Brilliant Earth with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brilliant Earth and T.J. Maxx.

Diversification Opportunities for Brilliant Earth and T.J. Maxx

0.33

Correlation Coefficient

Brilliant Earth  T.J. Maxx

Weak diversification

The 3 months correlation between Brilliant and T.J. is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Brilliant Earth Group and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Brilliant Earth 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 Brilliant Earth Group 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 Brilliant Earth i.e., Brilliant Earth and T.J. Maxx go up and down completely randomly.

Pair Corralation between Brilliant Earth and T.J. Maxx

Given the investment horizon of 90 days Brilliant Earth Group is expected to under-perform the T.J. Maxx. In addition to that, Brilliant Earth is 3.62 times more volatile than The TJX Companies. It trades about -0.02 of its total potential returns per unit of risk. The TJX Companies is currently generating about 0.1 per unit of volatility. If you would invest  7,673  in The TJX Companies on September 21, 2024 and sell it today you would earn a total of  4,603  from holding The TJX Companies or generate 59.99% return on investment over 90 days.

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

Brilliant Earth Group  vs.  The TJX Companies

Brilliant Earth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brilliant Earth Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Brilliant Earth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

TJX Companies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The TJX Companies are ranked lower than 5 (%) 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brilliant Earth and T.J. Maxx

The main advantage of trading using opposite Brilliant Earth and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brilliant Earth 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 Brilliant Earth Group 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.