Correlation Between Ford and ASML Holding

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

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

Diversification Opportunities for Ford and ASML Holding

-0.42

Correlation Coefficient

Ford  ASML Holding

Very good diversification

The 3 months correlation between Ford and ASML is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and ASML Holding go up and down completely randomly.

Pair Corralation between Ford and ASML Holding

Taking into account the 90-day investment horizon Ford is expected to generate 25.37 times less return on investment than ASML Holding. But when comparing it to its historical volatility, Ford Motor is 1.25 times less risky than ASML Holding. It trades about 0.0 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  65,401  in ASML Holding NV on September 17, 2024 and sell it today you would earn a total of  6,126  from holding ASML Holding NV or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

Ford Motor  vs.  ASML Holding NV

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with Ford and ASML Holding

The main advantage of trading using opposite Ford and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.