Correlation Between CME and Japan Exchange
Can any of the company-specific risk be diversified away by investing in both CME and Japan Exchange 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 Japan Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Japan Exchange Group, you can compare the effects of market volatilities on CME and Japan Exchange 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 Japan Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Japan Exchange.
Diversification Opportunities for CME and Japan Exchange
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between CME and Japan is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Japan Exchange Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Exchange Group 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 Japan Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Exchange Group has no effect on the direction of CME i.e., CME and Japan Exchange go up and down completely randomly.
Pair Corralation between CME and Japan Exchange
Considering the 90-day investment horizon CME is expected to generate 2.02 times less return on investment than Japan Exchange. But when comparing it to its historical volatility, CME Group is 1.72 times less risky than Japan Exchange. It trades about 0.06 of its potential returns per unit of risk. Japan Exchange Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 837.00 in Japan Exchange Group on September 12, 2024 and sell it today you would earn a total of 400.00 from holding Japan Exchange Group or generate 47.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
CME Group vs. Japan Exchange Group
Performance |
| Timeline |
| CME Group |
| Japan Exchange Group |
CME and Japan Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and Japan Exchange
The main advantage of trading using opposite CME and Japan Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Japan Exchange 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 Japan Exchange will offset losses from the drop in Japan Exchange's long position.The idea behind CME Group and Japan Exchange Group 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.| Japan Exchange vs. Moodys | Japan Exchange vs. MSCI Inc | Japan Exchange vs. Intercontinental Exchange | Japan Exchange vs. CME Group |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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