Correlation Between CME and Credit Suisse

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Can any of the company-specific risk be diversified away by investing in both CME and Credit Suisse 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 Credit Suisse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and Credit Suisse Group, you can compare the effects of market volatilities on CME and Credit Suisse 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 Credit Suisse. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Credit Suisse.

Diversification Opportunities for CME and Credit Suisse

-0.3
  Correlation Coefficient

Very good diversification

The 3 months correlation between CME and Credit is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Credit Suisse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse Group 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 Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse Group has no effect on the direction of CME i.e., CME and Credit Suisse go up and down completely randomly.

Pair Corralation between CME and Credit Suisse

Considering the 90-day investment horizon CME Group is expected to generate 0.18 times more return on investment than Credit Suisse. However, CME Group is 5.67 times less risky than Credit Suisse. It trades about 0.09 of its potential returns per unit of risk. Credit Suisse Group is currently generating about -0.11 per unit of risk. If you would invest  15,464  in CME Group on September 10, 2024 and sell it today you would earn a total of  8,474  from holding CME Group or generate 54.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy24.44%
ValuesDaily Returns

CME Group  vs.  Credit Suisse Group

 Performance 
       Timeline  
CME Group 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, CME may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Credit Suisse Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Credit Suisse Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Credit Suisse is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CME and Credit Suisse Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CME and Credit Suisse

The main advantage of trading using opposite CME and Credit Suisse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Credit Suisse 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 Credit Suisse will offset losses from the drop in Credit Suisse's long position.
The idea behind CME Group and Credit Suisse 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.
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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