Correlation Between T.J. Maxx and Capri Holdings

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

Diversification Opportunities for T.J. Maxx and Capri Holdings

-0.49

Correlation Coefficient

T.J. Maxx  Capri Holdings

Very good diversification

The 3 months correlation between T.J. and Capri is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and Capri Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capri Holdings 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 Capri Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capri Holdings has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and Capri Holdings go up and down completely randomly.

Pair Corralation between T.J. Maxx and Capri Holdings

Considering the 90-day investment horizon The TJX Companies is expected to generate 0.22 times more return on investment than Capri Holdings. However, The TJX Companies is 4.59 times less risky than Capri Holdings. It trades about 0.08 of its potential returns per unit of risk. Capri Holdings is currently generating about -0.03 per unit of risk. If you would invest  11,033  in The TJX Companies on September 21, 2024 and sell it today you would earn a total of  1,243  from holding The TJX Companies or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

The TJX Companies  vs.  Capri Holdings

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

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with T.J. Maxx and Capri Holdings

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

The idea behind The TJX Companies and Capri Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.