Correlation Between CME and TMX Group
Can any of the company-specific risk be diversified away by investing in both CME and TMX Group 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 TMX Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and TMX Group Limited, you can compare the effects of market volatilities on CME and TMX Group 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 TMX Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and TMX Group.
Diversification Opportunities for CME and TMX Group
Very good diversification
The 3 months correlation between CME and TMX is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited 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 TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of CME i.e., CME and TMX Group go up and down completely randomly.
Pair Corralation between CME and TMX Group
Considering the 90-day investment horizon CME Group is expected to generate 0.23 times more return on investment than TMX Group. However, CME Group is 4.4 times less risky than TMX Group. It trades about 0.08 of its potential returns per unit of risk. TMX Group Limited is currently generating about -0.02 per unit of risk. If you would invest 17,614 in CME Group on August 31, 2024 and sell it today you would earn a total of 6,186 from holding CME Group or generate 35.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.05% |
| Values | Daily Returns |
CME Group vs. TMX Group Limited
Performance |
| Timeline |
| CME Group |
| TMX Group Limited |
CME and TMX Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and TMX Group
The main advantage of trading using opposite CME and TMX Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, TMX Group 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 TMX Group will offset losses from the drop in TMX Group's long position.The idea behind CME Group and TMX Group Limited 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.| TMX Group vs. HUMANA INC | TMX Group vs. SCOR PK | TMX Group vs. Aquagold International | TMX Group vs. Thrivent High Yield |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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