Correlation Between CME and Cboe Global
Can any of the company-specific risk be diversified away by investing in both CME and Cboe Global 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 Cboe Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Cboe Global Markets, you can compare the effects of market volatilities on CME and Cboe Global 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 Cboe Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Cboe Global.
Diversification Opportunities for CME and Cboe Global
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between CME and Cboe is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Cboe Global Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Global Markets 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 Cboe Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Global Markets has no effect on the direction of CME i.e., CME and Cboe Global go up and down completely randomly.
Pair Corralation between CME and Cboe Global
Considering the 90-day investment horizon CME Group is expected to generate 0.61 times more return on investment than Cboe Global. However, CME Group is 1.63 times less risky than Cboe Global. It trades about -0.01 of its potential returns per unit of risk. Cboe Global Markets is currently generating about -0.02 per unit of risk. If you would invest 22,714 in CME Group on August 24, 2024 and sell it today you would lose (58.00) from holding CME Group or give up 0.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CME Group vs. Cboe Global Markets
Performance |
| Timeline |
| CME Group |
| Cboe Global Markets |
CME and Cboe Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and Cboe Global
The main advantage of trading using opposite CME and Cboe Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Cboe Global 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 Cboe Global will offset losses from the drop in Cboe Global's long position.The idea behind CME Group and Cboe Global Markets 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.| Cboe Global vs. CME Group | Cboe Global vs. MarketAxess Holdings | Cboe Global vs. Intercontinental Exchange | Cboe Global vs. Allegion PLC |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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