Correlation Between CME and MTN Group

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

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

Diversification Opportunities for CME and MTN Group

-0.77

Correlation Coefficient

CME  MTN Group

Pay attention - limited upside

The 3 months correlation between CME and MTN is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and MTN Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTN Group Limited 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 MTN Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTN Group Limited has no effect on the direction of CME i.e., CME and MTN Group go up and down completely randomly.

Pair Corralation between CME and MTN Group

Considering the 90-day investment horizon CME Group is expected to generate 0.36 times more return on investment than MTN Group. However, CME Group is 2.76 times less risky than MTN Group. It trades about 0.08 of its potential returns per unit of risk. MTN Group Limited is currently generating about -0.03 per unit of risk. If you would invest  18,975  in CME Group on October 9, 2024 and sell it today you would earn a total of  3,726  from holding CME Group or generate 19.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.21%
Values	Daily Returns

CME Group  vs.  MTN Group Limited

CME Group

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 7 (%) 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.

MTN Group Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTN Group Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CME and MTN Group

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

The idea behind CME Group and MTN Group Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.