Correlation Between ASML Holding and Tokyo Electron

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

By analyzing existing cross correlation between ASML Holding NV and Tokyo Electron Limited, you can compare the effects of market volatilities on ASML Holding and Tokyo Electron 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 ASML Holding with a short position of Tokyo Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Tokyo Electron.

Diversification Opportunities for ASML Holding and Tokyo Electron

0.84

Correlation Coefficient

ASML Holding  Tokyo Electron

Very poor diversification

The 3 months correlation between ASML and Tokyo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Tokyo Electron Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron and ASML Holding 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 ASML Holding NV are associated (or correlated) with Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of ASML Holding i.e., ASML Holding and Tokyo Electron go up and down completely randomly.

Pair Corralation between ASML Holding and Tokyo Electron

Assuming the 90 days trading horizon ASML Holding NV is expected to generate 0.83 times more return on investment than Tokyo Electron. However, ASML Holding NV is 1.21 times less risky than Tokyo Electron. It trades about -0.01 of its potential returns per unit of risk. Tokyo Electron Limited is currently generating about -0.01 per unit of risk. If you would invest  67,564  in ASML Holding NV on December 28, 2024 and sell it today you would lose (1,724) from holding ASML Holding NV or give up 2.55% of portfolio value over 90 days.

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

ASML Holding NV  vs.  Tokyo Electron Limited

ASML Holding NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, ASML Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Tokyo Electron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tokyo Electron Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Tokyo Electron is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASML Holding and Tokyo Electron

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

The idea behind ASML Holding NV and Tokyo Electron 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.