Correlation Between CME and Dun Bradstreet
Can any of the company-specific risk be diversified away by investing in both CME and Dun Bradstreet 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 Dun Bradstreet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Dun Bradstreet Holdings, you can compare the effects of market volatilities on CME and Dun Bradstreet 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 Dun Bradstreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Dun Bradstreet.
Diversification Opportunities for CME and Dun Bradstreet
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CME and Dun is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Dun Bradstreet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dun Bradstreet Holdings 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 Dun Bradstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dun Bradstreet Holdings has no effect on the direction of CME i.e., CME and Dun Bradstreet go up and down completely randomly.
Pair Corralation between CME and Dun Bradstreet
Considering the 90-day investment horizon CME Group is expected to generate 0.39 times more return on investment than Dun Bradstreet. However, CME Group is 2.59 times less risky than Dun Bradstreet. It trades about 0.24 of its potential returns per unit of risk. Dun Bradstreet Holdings is currently generating about -0.39 per unit of risk. If you would invest 23,439 in CME Group on November 29, 2024 and sell it today you would earn a total of 1,360 from holding CME Group or generate 5.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
CME Group vs. Dun Bradstreet Holdings
Performance |
Timeline |
CME Group |
Dun Bradstreet Holdings |
CME and Dun Bradstreet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CME and Dun Bradstreet
The main advantage of trading using opposite CME and Dun Bradstreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Dun Bradstreet 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 Dun Bradstreet will offset losses from the drop in Dun Bradstreet's long position.The idea behind CME Group and Dun Bradstreet Holdings 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.Dun Bradstreet vs. FactSet Research Systems | ||
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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