Correlation Between ASML Holding and Globalfoundries

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

Diversification Opportunities for ASML Holding and Globalfoundries

0.29

Correlation Coefficient

ASML Holding  Globalfoundries

Modest diversification

The 3 months correlation between ASML and Globalfoundries is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of ASML Holding i.e., ASML Holding and Globalfoundries go up and down completely randomly.

Pair Corralation between ASML Holding and Globalfoundries

Given the investment horizon of 90 days ASML Holding NV is expected to generate 0.9 times more return on investment than Globalfoundries. However, ASML Holding NV is 1.11 times less risky than Globalfoundries. It trades about 0.01 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.07 per unit of risk. If you would invest  71,950  in ASML Holding NV on December 22, 2024 and sell it today you would lose (328.00) from holding ASML Holding NV or give up 0.46% of portfolio value over 90 days.

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

ASML Holding NV  vs.  Globalfoundries

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 quite persistent primary indicators, ASML Holding is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Globalfoundries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Globalfoundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental 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 Globalfoundries

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

The idea behind ASML Holding NV and Globalfoundries 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.