Correlation Between Grand Canyon and T.J. Maxx

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

Diversification Opportunities for Grand Canyon and T.J. Maxx

0.92

Correlation Coefficient

Grand Canyon  T.J. Maxx

Almost no diversification

The 3 months correlation between Grand and T.J. is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Grand Canyon 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 Grand Canyon Education 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 Grand Canyon i.e., Grand Canyon and T.J. Maxx go up and down completely randomly.

Pair Corralation between Grand Canyon and T.J. Maxx

Assuming the 90 days trading horizon Grand Canyon Education is expected to under-perform the T.J. Maxx. In addition to that, Grand Canyon is 1.2 times more volatile than The TJX Companies. It trades about -0.11 of its total potential returns per unit of risk. The TJX Companies is currently generating about -0.13 per unit of volatility. If you would invest  11,972  in The TJX Companies on October 9, 2024 and sell it today you would lose (296.00) from holding The TJX Companies or give up 2.47% of portfolio value over 90 days.

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

Grand Canyon Education  vs.  The TJX Companies

Grand Canyon Education

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

TJX Companies

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Grand Canyon and T.J. Maxx

The main advantage of trading using opposite Grand Canyon and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grand Canyon 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 Grand Canyon Education 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.