Correlation Between ASML Holding and Ultra Clean

Can any of the company-specific risk be diversified away by investing in both ASML Holding and Ultra Clean 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 Ultra Clean 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 Ultra Clean Holdings, you can compare the effects of market volatilities on ASML Holding and Ultra Clean 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 Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Ultra Clean.

Diversification Opportunities for ASML Holding and Ultra Clean

0.77

Correlation Coefficient

ASML Holding  Ultra Clean

Poor diversification

The 3 months correlation between ASML and Ultra is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of ASML Holding i.e., ASML Holding and Ultra Clean go up and down completely randomly.

Pair Corralation between ASML Holding and Ultra Clean

Assuming the 90 days trading horizon ASML Holding NV is expected to generate 0.5 times more return on investment than Ultra Clean. However, ASML Holding NV is 1.98 times less risky than Ultra Clean. It trades about -0.01 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about -0.14 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	Significant
Accuracy	100.0%
Values	Daily Returns

ASML Holding NV  vs.  Ultra Clean Holdings

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.

Ultra Clean Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ASML Holding and Ultra Clean

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

The idea behind ASML Holding NV and Ultra Clean Holdings 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.