Correlation Between T.J. Maxx and BHP Group

Can any of the company-specific risk be diversified away by investing in both T.J. Maxx and BHP Group 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 BHP Group 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 BHP Group Limited, you can compare the effects of market volatilities on T.J. Maxx and BHP Group 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 BHP Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of T.J. Maxx and BHP Group.

Diversification Opportunities for T.J. Maxx and BHP Group

-0.43

Correlation Coefficient

T.J. Maxx  BHP Group

Very good diversification

The 3 months correlation between T.J. and BHP is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and BHP Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BHP Group Limited 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 BHP Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BHP Group Limited has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and BHP Group go up and down completely randomly.

Pair Corralation between T.J. Maxx and BHP Group

Considering the 90-day investment horizon The TJX Companies is expected to generate 0.7 times more return on investment than BHP Group. However, The TJX Companies is 1.43 times less risky than BHP Group. It trades about -0.01 of its potential returns per unit of risk. BHP Group Limited is currently generating about -0.02 per unit of risk. If you would invest  9,605  in The TJX Companies on January 26, 2024 and sell it today you would lose (77.00) from holding The TJX Companies or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The TJX Companies  vs.  BHP Group Limited

TJX Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The TJX Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, T.J. Maxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

BHP Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BHP Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, BHP Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with T.J. Maxx and BHP Group

The main advantage of trading using opposite T.J. Maxx and BHP Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T.J. Maxx position performs unexpectedly, BHP Group 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 BHP Group will offset losses from the drop in BHP Group's long position.

The idea behind The TJX Companies and BHP Group Limited 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.