Correlation Between CME and Deutsche Boerse

Can any of the company-specific risk be diversified away by investing in both CME and Deutsche Boerse 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 Deutsche Boerse into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CME Group and Deutsche Boerse AG, you can compare the effects of market volatilities on CME and Deutsche Boerse 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 Deutsche Boerse. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Deutsche Boerse.

Diversification Opportunities for CME and Deutsche Boerse

0.09

Correlation Coefficient

CME  Deutsche Boerse

Significant diversification

The 3 months correlation between CME and Deutsche is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Deutsche Boerse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Boerse AG 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 Deutsche Boerse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Boerse AG has no effect on the direction of CME i.e., CME and Deutsche Boerse go up and down completely randomly.

Pair Corralation between CME and Deutsche Boerse

Considering the 90-day investment horizon CME Group is expected to generate 0.91 times more return on investment than Deutsche Boerse. However, CME Group is 1.1 times less risky than Deutsche Boerse. It trades about 0.16 of its potential returns per unit of risk. Deutsche Boerse AG is currently generating about -0.01 per unit of risk. If you would invest  21,648  in CME Group on September 25, 2024 and sell it today you would earn a total of  2,153  from holding CME Group or generate 9.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CME Group  vs.  Deutsche Boerse AG

CME Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 12 (%) 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.

Deutsche Boerse AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deutsche Boerse AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Deutsche Boerse is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CME and Deutsche Boerse

The main advantage of trading using opposite CME and Deutsche Boerse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, Deutsche Boerse 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 Deutsche Boerse will offset losses from the drop in Deutsche Boerse's long position.

The idea behind CME Group and Deutsche Boerse AG 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.