Correlation Between CME and Deutsche Brse

Can any of the company-specific risk be diversified away by investing in both CME and Deutsche Brse 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 Brse 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 Brse AG, you can compare the effects of market volatilities on CME and Deutsche Brse 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 Brse. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and Deutsche Brse.

Diversification Opportunities for CME and Deutsche Brse

0.82

Correlation Coefficient

CME  Deutsche Brse

Very poor diversification

The 3 months correlation between CME and Deutsche is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Deutsche Brse AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Brse 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 Brse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Brse AG has no effect on the direction of CME i.e., CME and Deutsche Brse go up and down completely randomly.

Pair Corralation between CME and Deutsche Brse

Assuming the 90 days trading horizon CME Group is expected to generate 1.39 times more return on investment than Deutsche Brse. However, CME is 1.39 times more volatile than Deutsche Brse AG. It trades about 0.2 of its potential returns per unit of risk. Deutsche Brse AG is currently generating about 0.1 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	Strong
Accuracy	100.0%
Values	Daily Returns

CME Group  vs.  Deutsche Brse AG

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 fragile basic indicators, CME reported solid returns over the last few months and may actually be approaching a breakup point.

Deutsche Brse AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Brse AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Deutsche Brse is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CME and Deutsche Brse

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

The idea behind CME Group and Deutsche Brse 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .