Correlation Between SP Global and CME

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

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

Diversification Opportunities for SP Global and CME

-0.15

Correlation Coefficient

SP Global  CME

Good diversification

The 3 months correlation between SPGI and CME is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding SP Global and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and SP Global 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 SP Global 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 SP Global i.e., SP Global and CME go up and down completely randomly.

Pair Corralation between SP Global and CME

Given the investment horizon of 90 days SP Global is expected to generate 3.91 times less return on investment than CME. In addition to that, SP Global is 1.11 times more volatile than CME Group. It trades about 0.04 of its total potential returns per unit of risk. CME Group is currently generating about 0.19 per unit of volatility. If you would invest  21,153  in CME Group on September 3, 2024 and sell it today you would earn a total of  2,408  from holding CME Group or generate 11.38% return on investment over 90 days.

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

SP Global  vs.  CME Group

SP Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SP Global are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, SP Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

CME Group

Risk-Adjusted Performance

15 of 100

Solid

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. 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 SP Global and CME

The main advantage of trading using opposite SP Global and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global 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 SP Global 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.