Correlation Between T.J. Maxx and Aritzia

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

Diversification Opportunities for T.J. Maxx and Aritzia

0.29

Correlation Coefficient

T.J. Maxx  Aritzia

Modest diversification

The 3 months correlation between T.J. and Aritzia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia 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 Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and Aritzia go up and down completely randomly.

Pair Corralation between T.J. Maxx and Aritzia

Considering the 90-day investment horizon T.J. Maxx is expected to generate 3.56 times less return on investment than Aritzia. But when comparing it to its historical volatility, The TJX Companies is 5.36 times less risky than Aritzia. It trades about 0.08 of its potential returns per unit of risk. Aritzia is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,627  in Aritzia on October 13, 2024 and sell it today you would earn a total of  366.00  from holding Aritzia or generate 10.09% return on investment over 90 days.

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

The TJX Companies  vs.  Aritzia

TJX Companies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The TJX Companies are ranked lower than 6 (%) 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.

Aritzia

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aritzia reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T.J. Maxx and Aritzia

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

The idea behind The TJX Companies and Aritzia 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 Commodity Directory module to find actively traded commodities issued by global exchanges.