Correlation Between Cboe Global and CME

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

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

Diversification Opportunities for Cboe Global and CME

0.18

Correlation Coefficient

Cboe Global  CME

Average diversification

The 3 months correlation between Cboe and CME is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Global Markets and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and Cboe 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 Cboe Global Markets 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 Cboe Global i.e., Cboe Global and CME go up and down completely randomly.

Pair Corralation between Cboe Global and CME

Given the investment horizon of 90 days Cboe Global Markets is expected to under-perform the CME. In addition to that, Cboe Global is 1.31 times more volatile than CME Group. It trades about -0.03 of its total potential returns per unit of risk. CME Group is currently generating about 0.13 per unit of volatility. If you would invest  21,626  in CME Group on September 12, 2024 and sell it today you would earn a total of  1,804  from holding CME Group or generate 8.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Cboe Global Markets  vs.  CME Group

Cboe Global Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cboe Global Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cboe Global is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

CME Group

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, CME may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cboe Global and CME

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