Correlation Between CME and Intercontinental
Can any of the company-specific risk be diversified away by investing in both CME and Intercontinental 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 Intercontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Intercontinental Exchange, you can compare the effects of market volatilities on CME and Intercontinental 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 Intercontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Intercontinental.
Diversification Opportunities for CME and Intercontinental
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CME and Intercontinental is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange 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 Intercontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercontinental Exchange has no effect on the direction of CME i.e., CME and Intercontinental go up and down completely randomly.
Pair Corralation between CME and Intercontinental
Assuming the 90 days trading horizon CME Group is expected to under-perform the Intercontinental. But the stock apears to be less risky and, when comparing its historical volatility, CME Group is 1.04 times less risky than Intercontinental. The stock trades about -0.07 of its potential returns per unit of risk. The Intercontinental Exchange is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,386 in Intercontinental Exchange on October 21, 2024 and sell it today you would earn a total of 138.00 from holding Intercontinental Exchange or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CME Group vs. Intercontinental Exchange
Performance |
| Timeline |
| CME Group |
| Intercontinental Exchange |
CME and Intercontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CME and Intercontinental
The main advantage of trading using opposite CME and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Intercontinental 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 Intercontinental will offset losses from the drop in Intercontinental's long position.| CME vs. Intercontinental Exchange | CME vs. Hong Kong Exchanges | CME vs. London Stock Exchange | CME vs. Deutsche Brse AG |
| Intercontinental vs. CME Group | Intercontinental vs. Hong Kong Exchanges | Intercontinental vs. London Stock Exchange | Intercontinental vs. Deutsche Brse AG |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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