Correlation Between DATATEC and CME
Can any of the company-specific risk be diversified away by investing in both DATATEC and CME 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 DATATEC and CME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DATATEC LTD 2 and CME Group, you can compare the effects of market volatilities on DATATEC and CME 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 DATATEC with a short position of CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of DATATEC and CME.
Diversification Opportunities for DATATEC and CME
Very poor diversification
The 3 months correlation between DATATEC and CME is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding DATATEC LTD 2 and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and DATATEC 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 DATATEC LTD 2 are associated (or correlated) with CME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CME Group has no effect on the direction of DATATEC i.e., DATATEC and CME go up and down completely randomly.
Pair Corralation between DATATEC and CME
Assuming the 90 days trading horizon DATATEC LTD 2 is expected to generate 2.23 times more return on investment than CME. However, DATATEC is 2.23 times more volatile than CME Group. It trades about 0.15 of its potential returns per unit of risk. CME Group is currently generating about -0.1 per unit of risk. If you would invest 460.00 in DATATEC LTD 2 on October 11, 2024 and sell it today you would earn a total of 32.00 from holding DATATEC LTD 2 or generate 6.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
DATATEC LTD 2 vs. CME Group
Performance |
| Timeline |
| DATATEC LTD 2 |
| CME Group |
DATATEC and CME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DATATEC and CME
The main advantage of trading using opposite DATATEC and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATATEC position performs unexpectedly, CME 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 CME will offset losses from the drop in CME's long position.The idea behind DATATEC LTD 2 and CME 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.| CME vs. SPORTING | CME vs. PARKEN Sport Entertainment | CME vs. Transport International Holdings | CME vs. MAVEN WIRELESS SWEDEN |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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