Correlation Between T.J. Maxx and American Eagle

Can any of the company-specific risk be diversified away by investing in both T.J. Maxx and American Eagle 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 American Eagle 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 American Eagle Outfitters, you can compare the effects of market volatilities on T.J. Maxx and American Eagle 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 American Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of T.J. Maxx and American Eagle.

Diversification Opportunities for T.J. Maxx and American Eagle

-0.58

Correlation Coefficient

T.J. Maxx  American Eagle

Excellent diversification

The 3 months correlation between T.J. and American is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and American Eagle Outfitters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Eagle Outfitters 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 American Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Eagle Outfitters has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and American Eagle go up and down completely randomly.

Pair Corralation between T.J. Maxx and American Eagle

Considering the 90-day investment horizon The TJX Companies is expected to generate 0.4 times more return on investment than American Eagle. However, The TJX Companies is 2.53 times less risky than American Eagle. It trades about 0.09 of its potential returns per unit of risk. American Eagle Outfitters is currently generating about 0.03 per unit of risk. If you would invest  7,673  in The TJX Companies on September 24, 2024 and sell it today you would earn a total of  4,480  from holding The TJX Companies or generate 58.38% return on investment over 90 days.

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

The TJX Companies  vs.  American Eagle Outfitters

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.

American Eagle Outfitters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Eagle Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with T.J. Maxx and American Eagle

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

The idea behind The TJX Companies and American Eagle Outfitters 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.