Correlation Between CME and Singapore Exchange

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

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

Diversification Opportunities for CME and Singapore Exchange

0.59

Correlation Coefficient

CME  Singapore Exchange

Very weak diversification

The 3 months correlation between CME and Singapore is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and Singapore Exchange Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange 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 Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of CME i.e., CME and Singapore Exchange go up and down completely randomly.

Pair Corralation between CME and Singapore Exchange

Considering the 90-day investment horizon CME Group is expected to generate 0.38 times more return on investment than Singapore Exchange. However, CME Group is 2.61 times less risky than Singapore Exchange. It trades about 0.19 of its potential returns per unit of risk. Singapore Exchange Limited is currently generating about 0.06 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 Together
Strength	Weak
Accuracy	96.67%
Values	Daily Returns

CME Group  vs.  Singapore Exchange Limited

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.

Singapore Exchange

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Singapore Exchange may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CME and Singapore Exchange

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

The idea behind CME Group and Singapore Exchange 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.