Correlation Between GM and T.J. Maxx
Can any of the company-specific risk be diversified away by investing in both GM 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 GM 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 General Motors and The TJX Companies, you can compare the effects of market volatilities on GM 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 GM with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and T.J. Maxx.
Diversification Opportunities for GM and T.J. Maxx
Very good diversification
The 3 months correlation between GM and T.J. is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and GM 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 General Motors 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 GM i.e., GM and T.J. Maxx go up and down completely randomly.
Pair Corralation between GM and T.J. Maxx
Allowing for the 90-day total investment horizon GM is expected to generate 2.92 times less return on investment than T.J. Maxx. In addition to that, GM is 1.84 times more volatile than The TJX Companies. It trades about 0.02 of its total potential returns per unit of risk. The TJX Companies is currently generating about 0.1 per unit of volatility. If you would invest 9,482 in The TJX Companies on November 28, 2024 and sell it today you would earn a total of 2,210 from holding The TJX Companies or generate 23.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.86% |
| Values | Daily Returns |
General Motors vs. The TJX Companies
Performance |
| Timeline |
| General Motors |
| TJX Companies |
GM and T.J. Maxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and T.J. Maxx
The main advantage of trading using opposite GM and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and The TJX Companies 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.| T.J. Maxx vs. Xtep International Holdings | T.J. Maxx vs. Urban Outfitters | T.J. Maxx vs. Superior Plus Corp | T.J. Maxx vs. Origin Agritech |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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