Correlation Between CME and MarketAxess Holdings

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

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

Diversification Opportunities for CME and MarketAxess Holdings

-0.79

Correlation Coefficient

CME  MarketAxess Holdings

Pay attention - limited upside

The 3 months correlation between CME and MarketAxess is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and MarketAxess Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MarketAxess Holdings 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 MarketAxess Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MarketAxess Holdings has no effect on the direction of CME i.e., CME and MarketAxess Holdings go up and down completely randomly.

Pair Corralation between CME and MarketAxess Holdings

Considering the 90-day investment horizon CME Group is expected to generate 1.08 times more return on investment than MarketAxess Holdings. However, CME is 1.08 times more volatile than MarketAxess Holdings. It trades about 0.02 of its potential returns per unit of risk. MarketAxess Holdings is currently generating about -0.22 per unit of risk. If you would invest  23,224  in CME Group on October 23, 2024 and sell it today you would earn a total of  47.00  from holding CME Group or generate 0.2% return on investment over 90 days.

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

CME Group  vs.  MarketAxess Holdings

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.

MarketAxess Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MarketAxess Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CME and MarketAxess Holdings

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

The idea behind CME Group and MarketAxess Holdings 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.