Correlation Between MSCI and CME
Can any of the company-specific risk be diversified away by investing in both MSCI 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 MSCI and CME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MSCI Inc and CME Group, you can compare the effects of market volatilities on MSCI 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 MSCI with a short position of CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of MSCI and CME.
Diversification Opportunities for MSCI and CME
Poor diversification
The 3 months correlation between MSCI and CME is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and MSCI 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 MSCI Inc 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 MSCI i.e., MSCI and CME go up and down completely randomly.
Pair Corralation between MSCI and CME
Assuming the 90 days trading horizon MSCI Inc is expected to generate 2.33 times more return on investment than CME. However, MSCI is 2.33 times more volatile than CME Group. It trades about 0.1 of its potential returns per unit of risk. CME Group is currently generating about -0.07 per unit of risk. If you would invest 7,632 in MSCI Inc on August 27, 2024 and sell it today you would earn a total of 198.00 from holding MSCI Inc or generate 2.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 89.47% |
| Values | Daily Returns |
MSCI Inc vs. CME Group
Performance |
| Timeline |
| MSCI Inc |
| CME Group |
MSCI and CME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MSCI and CME
The main advantage of trading using opposite MSCI and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MSCI 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.| MSCI vs. Waste Management | MSCI vs. Unity Software | MSCI vs. Take Two Interactive Software | MSCI vs. Marfrig Global Foods |
| CME vs. BIONTECH SE DRN | CME vs. Automatic Data Processing | CME vs. Micron Technology | CME vs. Taiwan Semiconductor Manufacturing |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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