Correlation Between Urban Outfitters and T.J. Maxx
Can any of the company-specific risk be diversified away by investing in both Urban Outfitters 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 Urban Outfitters 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 Urban Outfitters and The TJX Companies, you can compare the effects of market volatilities on Urban Outfitters 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 Urban Outfitters with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Urban Outfitters and T.J. Maxx.
Diversification Opportunities for Urban Outfitters and T.J. Maxx
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Urban and T.J. is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Urban 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 Urban Outfitters 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 Urban 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 Urban Outfitters i.e., Urban Outfitters and T.J. Maxx go up and down completely randomly.
Pair Corralation between Urban Outfitters and T.J. Maxx
Assuming the 90 days horizon Urban Outfitters is expected to generate 2.02 times more return on investment than T.J. Maxx. However, Urban Outfitters is 2.02 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 2,673 in Urban Outfitters on August 30, 2024 and sell it today you would earn a total of 1,567 from holding Urban Outfitters or generate 58.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Urban Outfitters vs. The TJX Companies
Performance |
| Timeline |
| Urban Outfitters |
| TJX Companies |
Urban Outfitters and T.J. Maxx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Urban Outfitters and T.J. Maxx
The main advantage of trading using opposite Urban Outfitters and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Urban Outfitters 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.| Urban Outfitters vs. NEXT plc | Urban Outfitters vs. The Gap | Urban Outfitters vs. American Eagle Outfitters | Urban Outfitters vs. Superior Plus Corp |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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