Correlation Between Sprott Focus and ASML Holding

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

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

Diversification Opportunities for Sprott Focus and ASML Holding

0.65

Correlation Coefficient

Sprott Focus  ASML Holding

Poor diversification

The 3 months correlation between Sprott and ASML is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust 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 Sprott Focus 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 Sprott Focus Trust 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 Sprott Focus i.e., Sprott Focus and ASML Holding go up and down completely randomly.

Pair Corralation between Sprott Focus and ASML Holding

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.35 times more return on investment than ASML Holding. However, Sprott Focus Trust is 2.89 times less risky than ASML Holding. It trades about 0.08 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.02 per unit of risk. If you would invest  716.00  in Sprott Focus Trust on December 27, 2024 and sell it today you would earn a total of  27.00  from holding Sprott Focus Trust or generate 3.77% return on investment over 90 days.

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

Sprott Focus Trust  vs.  ASML Holding NV

Sprott Focus Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ASML Holding NV

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, ASML Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sprott Focus and ASML Holding

The main advantage of trading using opposite Sprott Focus and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus 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 Sprott Focus Trust 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.