Correlation Between CME and Coinbase Global

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

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

Diversification Opportunities for CME and Coinbase Global

-0.85

Correlation Coefficient

CME  Coinbase Global

Pay attention - limited upside

The 3 months correlation between CME and Coinbase is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Coinbase Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coinbase Global 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 Coinbase Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coinbase Global has no effect on the direction of CME i.e., CME and Coinbase Global go up and down completely randomly.

Pair Corralation between CME and Coinbase Global

Considering the 90-day investment horizon CME Group is expected to generate 0.24 times more return on investment than Coinbase Global. However, CME Group is 4.15 times less risky than Coinbase Global. It trades about 0.19 of its potential returns per unit of risk. Coinbase Global is currently generating about -0.08 per unit of risk. If you would invest  23,039  in CME Group on December 28, 2024 and sell it today you would earn a total of  3,146  from holding CME Group or generate 13.66% 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.  Coinbase Global

CME Group

Risk-Adjusted Performance

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. In spite of rather weak primary indicators, CME exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coinbase Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coinbase Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CME and Coinbase Global

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

The idea behind CME Group and Coinbase Global 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.