Correlation Between Gap and T.J. Maxx
Can any of the company-specific risk be diversified away by investing in both Gap 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 Gap 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 The Gap and The TJX Companies, you can compare the effects of market volatilities on Gap 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 Gap with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap and T.J. Maxx.
Diversification Opportunities for Gap and T.J. Maxx
Poor diversification
The 3 months correlation between Gap and T.J. is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Gap and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and Gap 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 Gap 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 Gap i.e., Gap and T.J. Maxx go up and down completely randomly.
Pair Corralation between Gap and T.J. Maxx
Assuming the 90 days horizon The Gap is expected to generate 2.96 times more return on investment than T.J. Maxx. However, Gap is 2.96 times more volatile than The TJX Companies. It trades about 0.05 of its potential returns per unit of risk. The TJX Companies is currently generating about 0.09 per unit of risk. If you would invest 1,238 in The Gap on August 30, 2024 and sell it today you would earn a total of 1,090 from holding The Gap or generate 88.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gap vs. The TJX Companies
Performance |
| Timeline |
| Gap |
| TJX Companies |
Gap and T.J. Maxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap and T.J. Maxx
The main advantage of trading using opposite Gap and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap 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.| Gap vs. Magnachip Semiconductor | Gap vs. Rogers Communications | Gap vs. Tower Semiconductor | Gap vs. Entravision Communications |
| 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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