Correlation Between OReilly Automotive and CME

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

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

Diversification Opportunities for OReilly Automotive and CME

0.92

Correlation Coefficient

OReilly Automotive  CME

Almost no diversification

The 3 months correlation between OReilly and CME is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding OReilly Automotive and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and OReilly Automotive 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 OReilly Automotive 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 OReilly Automotive i.e., OReilly Automotive and CME go up and down completely randomly.

Pair Corralation between OReilly Automotive and CME

Assuming the 90 days horizon OReilly Automotive is expected to under-perform the CME. In addition to that, OReilly Automotive is 1.07 times more volatile than CME Group. It trades about -0.11 of its total potential returns per unit of risk. CME Group is currently generating about 0.14 per unit of volatility. If you would invest  22,283  in CME Group on September 27, 2024 and sell it today you would earn a total of  592.00  from holding CME Group or generate 2.66% return on investment over 90 days.

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

OReilly Automotive  vs.  CME Group

OReilly Automotive

Risk-Adjusted Performance

9 of 100

OK

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

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.

Pair Trading with OReilly Automotive and CME

The main advantage of trading using opposite OReilly Automotive and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OReilly Automotive 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 OReilly Automotive 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.