Correlation Between T.J. Maxx and Fast Retailing

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

Diversification Opportunities for T.J. Maxx and Fast Retailing

0.19

Correlation Coefficient

T.J. Maxx  Fast Retailing

Average diversification

The 3 months correlation between T.J. and Fast is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and Fast Retailing go up and down completely randomly.

Pair Corralation between T.J. Maxx and Fast Retailing

Considering the 90-day investment horizon The TJX Companies is expected to under-perform the Fast Retailing. But the stock apears to be less risky and, when comparing its historical volatility, The TJX Companies is 2.21 times less risky than Fast Retailing. The stock trades about -0.17 of its potential returns per unit of risk. The Fast Retailing Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,277  in Fast Retailing Co on September 25, 2024 and sell it today you would earn a total of  103.00  from holding Fast Retailing Co or generate 3.14% return on investment over 90 days.

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

The TJX Companies  vs.  Fast Retailing Co

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.

Fast Retailing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fast Retailing Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Fast Retailing is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with T.J. Maxx and Fast Retailing

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

The idea behind The TJX Companies and Fast Retailing Co 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.