Correlation Between Dun Bradstreet and CME

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

By analyzing existing cross correlation between Dun Bradstreet Holdings and CME Group, you can compare the effects of market volatilities on Dun Bradstreet 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 Dun Bradstreet with a short position of CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dun Bradstreet and CME.

Diversification Opportunities for Dun Bradstreet and CME

0.62

Correlation Coefficient

Dun Bradstreet  CME

Poor diversification

The 3 months correlation between Dun and CME is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dun Bradstreet Holdings and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and Dun Bradstreet 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 Dun Bradstreet Holdings 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 Dun Bradstreet i.e., Dun Bradstreet and CME go up and down completely randomly.

Pair Corralation between Dun Bradstreet and CME

Considering the 90-day investment horizon Dun Bradstreet is expected to generate 4.92 times less return on investment than CME. But when comparing it to its historical volatility, Dun Bradstreet Holdings is 1.44 times less risky than CME. It trades about 0.06 of its potential returns per unit of risk. CME Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  22,690  in CME Group on September 21, 2024 and sell it today you would earn a total of  1,163  from holding CME Group or generate 5.13% return on investment over 90 days.

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

Dun Bradstreet Holdings  vs.  CME Group

Dun Bradstreet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dun Bradstreet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Dun Bradstreet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Dun Bradstreet and CME

The main advantage of trading using opposite Dun Bradstreet and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dun Bradstreet 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.

The idea behind Dun Bradstreet Holdings and CME 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..