Correlation Between ASML Holding and Azerion Group

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

Diversification Opportunities for ASML Holding and Azerion Group

0.54

Correlation Coefficient

ASML Holding  Azerion Group

Very weak diversification

The 3 months correlation between ASML and Azerion is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Azerion Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azerion Group NV 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 Azerion Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azerion Group NV has no effect on the direction of ASML Holding i.e., ASML Holding and Azerion Group go up and down completely randomly.

Pair Corralation between ASML Holding and Azerion Group

Assuming the 90 days trading horizon ASML Holding is expected to generate 2.5 times less return on investment than Azerion Group. But when comparing it to its historical volatility, ASML Holding NV is 2.18 times less risky than Azerion Group. It trades about 0.1 of its potential returns per unit of risk. Azerion Group NV is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  121.00  in Azerion Group NV on November 27, 2024 and sell it today you would earn a total of  42.00  from holding Azerion Group NV or generate 34.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

ASML Holding NV  vs.  Azerion Group NV

ASML Holding NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ASML Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Azerion Group NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Azerion Group NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Azerion Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASML Holding and Azerion Group

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

The idea behind ASML Holding NV and Azerion Group NV 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.