Correlation Between ASX Limited and CME
Can any of the company-specific risk be diversified away by investing in both ASX Limited 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 ASX Limited and CME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASX Limited ADR and CME Group, you can compare the effects of market volatilities on ASX Limited 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 ASX Limited with a short position of CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX Limited and CME.
Diversification Opportunities for ASX Limited and CME
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ASX and CME is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited ADR and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group and ASX Limited 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 ASX Limited ADR 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 ASX Limited i.e., ASX Limited and CME go up and down completely randomly.
Pair Corralation between ASX Limited and CME
Assuming the 90 days horizon ASX Limited ADR is expected to under-perform the CME. In addition to that, ASX Limited is 1.18 times more volatile than CME Group. It trades about -0.04 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 20,570 in CME Group on January 26, 2024 and sell it today you would earn a total of 689.00 from holding CME Group or generate 3.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASX Limited ADR vs. CME Group
Performance |
| Timeline |
| ASX Limited ADR |
| CME Group |
ASX Limited and CME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASX Limited and CME
The main advantage of trading using opposite ASX Limited and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASX Limited 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.| ASX Limited vs. Deutsche Boerse AG | ASX Limited vs. Japan Exchange Group | ASX Limited vs. CochLear Ltd ADR | ASX Limited vs. Wesfarmers Ltd ADR |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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