Correlation Between CME and B3 SA
Can any of the company-specific risk be diversified away by investing in both CME and B3 SA 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 CME and B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and B3 SA , you can compare the effects of market volatilities on CME and B3 SA 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 CME with a short position of B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and B3 SA.
Diversification Opportunities for CME and B3 SA
Pay attention - limited upside
The 3 months correlation between CME and B3SA3 is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 SA and CME 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 CME Group are associated (or correlated) with B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of CME i.e., CME and B3 SA go up and down completely randomly.
Pair Corralation between CME and B3 SA
Assuming the 90 days trading horizon CME Group is expected to generate 0.6 times more return on investment than B3 SA. However, CME Group is 1.68 times less risky than B3 SA. It trades about 0.07 of its potential returns per unit of risk. B3 SA is currently generating about -0.01 per unit of risk. If you would invest 22,342 in CME Group on September 2, 2024 and sell it today you would earn a total of 10,857 from holding CME Group or generate 48.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
CME Group vs. B3 SA
Performance |
| Timeline |
| CME Group |
| B3 SA |
CME and B3 SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and B3 SA
The main advantage of trading using opposite CME and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, B3 SA 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 B3 SA will offset losses from the drop in B3 SA's long position.The idea behind CME Group and B3 SA 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.| B3 SA vs. Banco Bradesco SA | B3 SA vs. Petrleo Brasileiro SA | B3 SA vs. Ita Unibanco Holding | B3 SA vs. Itasa Investimentos |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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