Correlation Between CME and B3 SA

Can any of the company-specific risk be diversified away by investing in both CME and B3 SA 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 B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CME Group and B3 SA , you can compare the effects of market volatilities on CME and B3 SA 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 B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and B3 SA.

Diversification Opportunities for CME and B3 SA

-0.8

Correlation Coefficient

CME  B3 SA

Pay attention - limited upside

The 3 months correlation between CME and BOLSY is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 SA 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 B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of CME i.e., CME and B3 SA go up and down completely randomly.

Pair Corralation between CME and B3 SA

Considering the 90-day investment horizon CME Group is expected to under-perform the B3 SA. But the stock apears to be less risky and, when comparing its historical volatility, CME Group is 5.15 times less risky than B3 SA. The stock trades about -0.03 of its potential returns per unit of risk. The B3 SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  490.00  in B3 SA on October 15, 2024 and sell it today you would earn a total of  3.00  from holding B3 SA or generate 0.61% return on investment over 90 days.

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

CME Group  vs.  B3 SA

CME Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, CME is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

B3 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days B3 SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CME and B3 SA

The main advantage of trading using opposite CME and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, B3 SA 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 B3 SA will offset losses from the drop in B3 SA's long position.

The idea behind CME Group and B3 SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.