Correlation Between T.J. Maxx and Next PLC

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

Diversification Opportunities for T.J. Maxx and Next PLC

-0.53

Correlation Coefficient

T.J. Maxx  Next PLC

Excellent diversification

The 3 months correlation between T.J. and Next is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and Next PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next PLC ADR 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 Next PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next PLC ADR has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and Next PLC go up and down completely randomly.

Pair Corralation between T.J. Maxx and Next PLC

Considering the 90-day investment horizon The TJX Companies is expected to under-perform the Next PLC. But the stock apears to be less risky and, when comparing its historical volatility, The TJX Companies is 1.18 times less risky than Next PLC. The stock trades about -0.22 of its potential returns per unit of risk. The Next PLC ADR is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  6,163  in Next PLC ADR on October 12, 2024 and sell it today you would earn a total of  327.00  from holding Next PLC ADR or generate 5.31% 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.  Next PLC ADR

TJX Companies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The TJX Companies are ranked lower than 8 (%) 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.

Next PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Next PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Next PLC 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 Next PLC

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

The idea behind The TJX Companies and Next PLC ADR 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.