Correlation Between CVS Health and T.J. Maxx
Can any of the company-specific risk be diversified away by investing in both CVS Health 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 CVS Health 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 CVS Health and The TJX Companies, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and T.J. Maxx.
Diversification Opportunities for CVS Health and T.J. Maxx
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and T.J. is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and CVS Health 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 CVS Health 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 CVS Health i.e., CVS Health and T.J. Maxx go up and down completely randomly.
Pair Corralation between CVS Health and T.J. Maxx
Assuming the 90 days trading horizon CVS Health is expected to under-perform the T.J. Maxx. In addition to that, CVS Health is 1.3 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 0.04 per unit of volatility. If you would invest 246,176 in The TJX Companies on September 12, 2024 and sell it today you would earn a total of 10,226 from holding The TJX Companies or generate 4.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. The TJX Companies
Performance |
| Timeline |
| CVS Health |
| TJX Companies |
CVS Health and T.J. Maxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and T.J. Maxx
The main advantage of trading using opposite CVS Health and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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.| CVS Health vs. Monster Beverage Corp | CVS Health vs. McEwen Mining | CVS Health vs. Grupo Carso SAB | CVS Health vs. Genworth Financial |
| T.J. Maxx vs. Lloyds Banking Group | T.J. Maxx vs. Verizon Communications | T.J. Maxx vs. Applied Materials | T.J. Maxx vs. Grupo Carso SAB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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