Correlation Between MarketAxess Holdings and CME

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

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

Diversification Opportunities for MarketAxess Holdings and CME

-0.8

Correlation Coefficient

MarketAxess Holdings  CME

Pay attention - limited upside

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

Pair Corralation between MarketAxess Holdings and CME

Given the investment horizon of 90 days MarketAxess Holdings is expected to under-perform the CME. In addition to that, MarketAxess Holdings is 1.26 times more volatile than CME Group. It trades about -0.38 of its total potential returns per unit of risk. CME Group is currently generating about 0.05 per unit of volatility. If you would invest  23,098  in CME Group on October 8, 2024 and sell it today you would earn a total of  152.00  from holding CME Group or generate 0.66% return on investment over 90 days.

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

MarketAxess Holdings  vs.  CME Group

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.

CME Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, CME may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with MarketAxess Holdings and CME

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

The idea behind MarketAxess Holdings and CME Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.