Correlation Between Industria and T.J. Maxx

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

Diversification Opportunities for Industria and T.J. Maxx

-0.35

Correlation Coefficient

Industria  T.J. Maxx

Very good diversification

The 3 months correlation between Industria and T.J. is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseo and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Industria 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 Industria de Diseo 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 Industria i.e., Industria and T.J. Maxx go up and down completely randomly.

Pair Corralation between Industria and T.J. Maxx

Assuming the 90 days horizon Industria de Diseo is expected to generate 2.02 times more return on investment than T.J. Maxx. However, Industria is 2.02 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 0.09 per unit of risk. If you would invest  2,573  in Industria de Diseo on September 25, 2024 and sell it today you would earn a total of  2,709  from holding Industria de Diseo or generate 105.29% return on investment over 90 days.

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

Industria de Diseo  vs.  The TJX Companies

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industria and T.J. Maxx

The main advantage of trading using opposite Industria and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industria 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 Industria de Diseo 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.