Correlation Between ASE Industrial and ASML Holding

Can any of the company-specific risk be diversified away by investing in both ASE Industrial and ASML Holding 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 ASE Industrial and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASE Industrial Holding and ASML Holding NV, you can compare the effects of market volatilities on ASE Industrial and ASML Holding 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 ASE Industrial with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and ASML Holding.

Diversification Opportunities for ASE Industrial and ASML Holding

0.63

Correlation Coefficient

ASE Industrial  ASML Holding

Poor diversification

The 3 months correlation between ASE and ASML is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV and ASE Industrial 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 ASE Industrial Holding are associated (or correlated) with ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of ASE Industrial i.e., ASE Industrial and ASML Holding go up and down completely randomly.

Pair Corralation between ASE Industrial and ASML Holding

Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.98 times more return on investment than ASML Holding. However, ASE Industrial Holding is 1.02 times less risky than ASML Holding. It trades about 0.18 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.13 per unit of risk. If you would invest  1,038  in ASE Industrial Holding on October 24, 2024 and sell it today you would earn a total of  77.00  from holding ASE Industrial Holding or generate 7.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

ASE Industrial Holding  vs.  ASML Holding NV

ASE Industrial Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ASE Industrial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ASML Holding NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain primary indicators, ASML Holding may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ASE Industrial and ASML Holding

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

The idea behind ASE Industrial Holding and ASML Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.