Correlation Between ASML Holding and Goodyear Tire

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

Diversification Opportunities for ASML Holding and Goodyear Tire

-0.46

Correlation Coefficient

ASML Holding  Goodyear Tire

Very good diversification

The 3 months correlation between ASML and Goodyear is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Goodyear Tire Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goodyear Tire Rubber 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 Goodyear Tire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goodyear Tire Rubber has no effect on the direction of ASML Holding i.e., ASML Holding and Goodyear Tire go up and down completely randomly.

Pair Corralation between ASML Holding and Goodyear Tire

Assuming the 90 days trading horizon ASML Holding NV is expected to generate 0.77 times more return on investment than Goodyear Tire. However, ASML Holding NV is 1.3 times less risky than Goodyear Tire. It trades about 0.03 of its potential returns per unit of risk. Goodyear Tire Rubber is currently generating about -0.06 per unit of risk. If you would invest  66,057  in ASML Holding NV on December 2, 2024 and sell it today you would earn a total of  1,763  from holding ASML Holding NV or generate 2.67% return on investment over 90 days.

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

ASML Holding NV  vs.  Goodyear Tire Rubber

ASML Holding NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, ASML Holding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Goodyear Tire Rubber

Risk-Adjusted Performance

Very Weak

Over the last 90 days Goodyear Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ASML Holding and Goodyear Tire

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

The idea behind ASML Holding NV and Goodyear Tire Rubber 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.