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 ADR, 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

0.75

Correlation Coefficient

CME  DEUTSCHE BOERSE

Poor diversification

The 3 months correlation between CME and DEUTSCHE is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and DEUTSCHE BOERSE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE BOERSE ADR 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 ADR 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

Assuming the 90 days trading horizon CME Group is expected to generate 1.24 times more return on investment than DEUTSCHE BOERSE. However, CME is 1.24 times more volatile than DEUTSCHE BOERSE ADR. It trades about 0.2 of its potential returns per unit of risk. DEUTSCHE BOERSE ADR is currently generating about 0.12 per unit of risk. If you would invest  19,504  in CME Group on September 27, 2024 and sell it today you would earn a total of  3,371  from holding CME Group or generate 17.28% return on investment over 90 days.

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

CME Group  vs.  DEUTSCHE BOERSE ADR

CME Group

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CME reported solid returns over the last few months and may actually be approaching a breakup point.

DEUTSCHE BOERSE ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DEUTSCHE BOERSE ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, DEUTSCHE BOERSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 ADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.