Correlation Between American Eagle and T.J. Maxx
Can any of the company-specific risk be diversified away by investing in both American Eagle and T.J. Maxx 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 American Eagle and T.J. Maxx into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Eagle Outfitters and The TJX Companies, you can compare the effects of market volatilities on American Eagle and T.J. Maxx 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 American Eagle with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and T.J. Maxx.
Diversification Opportunities for American Eagle and T.J. Maxx
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and T.J. is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and American Eagle 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 American Eagle Outfitters are associated (or correlated) with T.J. Maxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TJX Companies has no effect on the direction of American Eagle i.e., American Eagle and T.J. Maxx go up and down completely randomly.
Pair Corralation between American Eagle and T.J. Maxx
Assuming the 90 days horizon American Eagle is expected to generate 1.39 times less return on investment than T.J. Maxx. In addition to that, American Eagle is 2.23 times more volatile than The TJX Companies. It trades about 0.03 of its total potential returns per unit of risk. The TJX Companies is currently generating about 0.09 per unit of volatility. If you would invest 7,233 in The TJX Companies on August 30, 2024 and sell it today you would earn a total of 4,777 from holding The TJX Companies or generate 66.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Eagle Outfitters vs. The TJX Companies
Performance |
| Timeline |
| American Eagle Outfitters |
| TJX Companies |
American Eagle and T.J. Maxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Eagle and T.J. Maxx
The main advantage of trading using opposite American Eagle and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle position performs unexpectedly, T.J. Maxx 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 T.J. Maxx will offset losses from the drop in T.J. Maxx's long position.| American Eagle vs. Spirent Communications plc | American Eagle vs. Sixt Leasing SE | American Eagle vs. Microbot Medical | American Eagle vs. Singapore Telecommunications Limited |
| T.J. Maxx vs. NEXT plc | T.J. Maxx vs. The Gap | T.J. Maxx vs. American Eagle Outfitters | T.J. Maxx vs. Superior Plus Corp |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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