Correlation Between T.J. Maxx and Lululemon Athletica

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

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

Diversification Opportunities for T.J. Maxx and Lululemon Athletica

0.86

Correlation Coefficient

T.J. Maxx  Lululemon Athletica

Very poor diversification

The 3 months correlation between T.J. and Lululemon is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and Lululemon Athletica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lululemon Athletica and T.J. Maxx 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 The TJX Companies are associated (or correlated) with Lululemon Athletica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lululemon Athletica has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and Lululemon Athletica go up and down completely randomly.

Pair Corralation between T.J. Maxx and Lululemon Athletica

Assuming the 90 days horizon The TJX Companies is expected to generate 0.46 times more return on investment than Lululemon Athletica. However, The TJX Companies is 2.16 times less risky than Lululemon Athletica. It trades about -0.09 of its potential returns per unit of risk. Lululemon Athletica is currently generating about -0.11 per unit of risk. If you would invest  11,539  in The TJX Companies on December 21, 2024 and sell it today you would lose (779.00) from holding The TJX Companies or give up 6.75% of portfolio value over 90 days.

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

The TJX Companies  vs.  Lululemon Athletica

TJX Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days The TJX Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Lululemon Athletica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lululemon Athletica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with T.J. Maxx and Lululemon Athletica

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

The idea behind The TJX Companies and Lululemon Athletica 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.