Correlation Between CME and Moodys
Can any of the company-specific risk be diversified away by investing in both CME and Moodys 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 Moodys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Moodys, you can compare the effects of market volatilities on CME and Moodys 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 Moodys. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Moodys.
Diversification Opportunities for CME and Moodys
Very good diversification
The 3 months correlation between CME and Moodys is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of CME i.e., CME and Moodys go up and down completely randomly.
Pair Corralation between CME and Moodys
Considering the 90-day investment horizon CME is expected to generate 1.55 times less return on investment than Moodys. But when comparing it to its historical volatility, CME Group is 1.21 times less risky than Moodys. It trades about 0.07 of its potential returns per unit of risk. Moodys is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 28,625 in Moodys on August 24, 2024 and sell it today you would earn a total of 19,441 from holding Moodys or generate 67.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CME Group vs. Moodys
Performance |
| Timeline |
| CME Group |
| Moodys |
CME and Moodys Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and Moodys
The main advantage of trading using opposite CME and Moodys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Moodys 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 Moodys will offset losses from the drop in Moodys' long position.The idea behind CME Group and Moodys 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.| Moodys vs. Dun Bradstreet Holdings | Moodys vs. Intercontinental Exchange | Moodys vs. SP Global | Moodys vs. Nasdaq Inc |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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