Correlation Between CME and Singapore Exchange

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

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

Diversification Opportunities for CME and Singapore Exchange

0.6

Correlation Coefficient

CME  Singapore Exchange

Poor diversification

The 3 months correlation between CME and Singapore is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Singapore Exchange Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore 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 Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of CME i.e., CME and Singapore Exchange go up and down completely randomly.

Pair Corralation between CME and Singapore Exchange

Considering the 90-day investment horizon CME is expected to generate 1.34 times less return on investment than Singapore Exchange. But when comparing it to its historical volatility, CME Group is 2.48 times less risky than Singapore Exchange. It trades about 0.08 of its potential returns per unit of risk. Singapore Exchange Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  619.00  in Singapore Exchange Limited on September 19, 2024 and sell it today you would earn a total of  271.00  from holding Singapore Exchange Limited or generate 43.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.73%
Values	Daily Returns

CME Group  vs.  Singapore Exchange Limited

CME Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 13 (%) 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.

Singapore Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Exchange Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Singapore Exchange is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CME and Singapore Exchange

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

The idea behind CME Group and Singapore Exchange Limited 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.