Correlation Between CME and FactSet Research

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Can any of the company-specific risk be diversified away by investing in both CME and FactSet Research 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 FactSet Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CME Group and FactSet Research Systems, you can compare the effects of market volatilities on CME and FactSet Research 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 FactSet Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of CME and FactSet Research.

Diversification Opportunities for CME and FactSet Research

0.04
  Correlation Coefficient

Significant diversification

The 3 months correlation between CME and FactSet is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CME Group and FactSet Research Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FactSet Research Systems 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 FactSet Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FactSet Research Systems has no effect on the direction of CME i.e., CME and FactSet Research go up and down completely randomly.

Pair Corralation between CME and FactSet Research

Considering the 90-day investment horizon CME is expected to generate 6.17 times less return on investment than FactSet Research. But when comparing it to its historical volatility, CME Group is 1.21 times less risky than FactSet Research. It trades about 0.0 of its potential returns per unit of risk. FactSet Research Systems is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  43,415  in FactSet Research Systems on December 29, 2023 and sell it today you would earn a total of  2,024  from holding FactSet Research Systems or generate 4.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CME Group  vs.  FactSet Research Systems

 Performance 
       Timeline  
CME Group 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CME Group are ranked lower than 3 (%) 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.
FactSet Research Systems 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days FactSet Research Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CME and FactSet Research Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CME and FactSet Research

The main advantage of trading using opposite CME and FactSet Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CME position performs unexpectedly, FactSet Research 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 FactSet Research will offset losses from the drop in FactSet Research's long position.
The idea behind CME Group and FactSet Research Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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