Correlation Between ASML Holding and Advantest

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

Diversification Opportunities for ASML Holding and Advantest

-0.88

Correlation Coefficient

ASML Holding  Advantest

Pay attention - limited upside

The 3 months correlation between ASML and Advantest is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Advantest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantest 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 Advantest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantest has no effect on the direction of ASML Holding i.e., ASML Holding and Advantest go up and down completely randomly.

Pair Corralation between ASML Holding and Advantest

Assuming the 90 days horizon ASML Holding NV is expected to under-perform the Advantest. In addition to that, ASML Holding is 1.08 times more volatile than Advantest. It trades about -0.04 of its total potential returns per unit of risk. Advantest is currently generating about 0.21 per unit of volatility. If you would invest  4,347  in Advantest on September 17, 2024 and sell it today you would earn a total of  1,903  from holding Advantest or generate 43.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

ASML Holding NV  vs.  Advantest

ASML Holding NV

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Advantest

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Advantest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASML Holding and Advantest

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

The idea behind ASML Holding NV and Advantest 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.