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, 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
Very good diversification
The 3 months correlation between T.J. and NEXT is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and NEXT plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXT plc 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 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
Assuming the 90 days horizon T.J. Maxx is expected to generate 1.16 times less return on investment than NEXT Plc. But when comparing it to its historical volatility, The TJX Companies is 1.34 times less risky than NEXT Plc. It trades about 0.09 of its potential returns per unit of risk. NEXT plc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 6,597 in NEXT plc on August 30, 2024 and sell it today you would earn a total of 5,003 from holding NEXT plc or generate 75.84% 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
Performance |
| Timeline |
| TJX Companies |
| NEXT plc |
T.J. Maxx and NEXT Plc Volatility Contrast
Predicted Return Density |
| Returns |
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.| 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 |
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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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