Correlation Between T.J. Maxx and Cleveland Cliffs

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

Diversification Opportunities for T.J. Maxx and Cleveland Cliffs

0.33

Correlation Coefficient

T.J. Maxx  Cleveland Cliffs

Weak diversification

The 3 months correlation between T.J. and Cleveland is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding The TJX Companies and Cleveland Cliffs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cleveland Cliffs 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 Cleveland Cliffs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cleveland Cliffs has no effect on the direction of T.J. Maxx i.e., T.J. Maxx and Cleveland Cliffs go up and down completely randomly.

Pair Corralation between T.J. Maxx and Cleveland Cliffs

Considering the 90-day investment horizon The TJX Companies is expected to under-perform the Cleveland Cliffs. But the stock apears to be less risky and, when comparing its historical volatility, The TJX Companies is 1.45 times less risky than Cleveland Cliffs. The stock trades about -0.27 of its potential returns per unit of risk. The Cleveland Cliffs is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,120  in Cleveland Cliffs on January 20, 2024 and sell it today you would lose (37.00) from holding Cleveland Cliffs or give up 1.75% of portfolio value over 90 days.

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

The TJX Companies  vs.  Cleveland Cliffs

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.

Cleveland Cliffs

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cleveland Cliffs are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Cleveland Cliffs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with T.J. Maxx and Cleveland Cliffs

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

The idea behind The TJX Companies and Cleveland Cliffs 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..