Correlation Between Capri Holdings and T.J. Maxx

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

Diversification Opportunities for Capri Holdings and T.J. Maxx

-0.51

Correlation Coefficient

Capri Holdings  T.J. Maxx

Excellent diversification

The 3 months correlation between Capri and T.J. is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Capri Holdings 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 Capri Holdings 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 Capri Holdings i.e., Capri Holdings and T.J. Maxx go up and down completely randomly.

Pair Corralation between Capri Holdings and T.J. Maxx

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the T.J. Maxx. In addition to that, Capri Holdings is 3.85 times more volatile than The TJX Companies. It trades about -0.03 of its total potential returns per unit of risk. The TJX Companies is currently generating about 0.09 per unit of volatility. If you would invest  7,916  in The TJX Companies on September 30, 2024 and sell it today you would earn a total of  4,478  from holding The TJX Companies or generate 56.57% return on investment over 90 days.

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

Capri Holdings  vs.  The TJX Companies

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

TJX Companies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The TJX Companies are ranked lower than 7 (%) 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 Capri Holdings and T.J. Maxx

The main advantage of trading using opposite Capri Holdings and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capri Holdings 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 Capri Holdings 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.