Correlation Between American Eagle and T.J. Maxx

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Can any of the company-specific risk be diversified away by investing in both American Eagle 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 American Eagle 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 American Eagle Outfitters and TJX Companies, you can compare the effects of market volatilities on American Eagle 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 American Eagle with a short position of T.J. Maxx. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Eagle and T.J. Maxx.

Diversification Opportunities for American Eagle and T.J. Maxx

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between American and T.J. Maxx is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding American Eagle Outfitters and TJX Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TJX Companies and American Eagle 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 American Eagle 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 American Eagle i.e., American Eagle and T.J. Maxx go up and down completely randomly.

Pair Corralation between American Eagle and T.J. Maxx

Considering the 90-day investment horizon American Eagle Outfitters is expected to under-perform the T.J. Maxx. In addition to that, American Eagle is 1.89 times more volatile than TJX Companies. It trades about -0.05 of its total potential returns per unit of risk. TJX Companies is currently generating about 0.07 per unit of volatility. If you would invest  5,758  in TJX Companies on July 2, 2022 and sell it today you would earn a total of  376.00  from holding TJX Companies or generate 6.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

American Eagle Outfitters  vs.  TJX Companies

 Performance (%) 
       Timeline  
American Eagle Outfitters 
American Performance
0 of 100
Over the last 90 days American Eagle Outfitters has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

American Price Channel

TJX Companies 
T.J. Maxx Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in TJX Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward-looking indicators, T.J. Maxx may actually be approaching a critical reversion point that can send shares even higher in October 2022.

T.J. Maxx Price Channel

American Eagle and T.J. Maxx Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Eagle and T.J. Maxx

The main advantage of trading using opposite American Eagle and T.J. Maxx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Eagle 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.
American Eagle vs. Amazon Inc
The idea behind American Eagle Outfitters and 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. Amazon Inc
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 Transaction History module to view history of all your transactions and understand their impact on performance.

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