Correlation Between KLA and ASML Holding

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

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

Diversification Opportunities for KLA and ASML Holding

0.36

Correlation Coefficient

KLA  ASML Holding

Weak diversification

The 3 months correlation between KLA and ASML is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KLA Corp. 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 KLA 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 KLA Corporation 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 KLA i.e., KLA and ASML Holding go up and down completely randomly.

Pair Corralation between KLA and ASML Holding

Assuming the 90 days trading horizon KLA Corporation is expected to generate 0.75 times more return on investment than ASML Holding. However, KLA Corporation is 1.34 times less risky than ASML Holding. It trades about 0.02 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.04 per unit of risk. If you would invest  99,540  in KLA Corporation on December 22, 2024 and sell it today you would earn a total of  1,150  from holding KLA Corporation or generate 1.16% return on investment over 90 days.

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

KLA Corp.  vs.  ASML Holding NV

KLA Corporation

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Corporation are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, KLA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with KLA and ASML Holding

The main advantage of trading using opposite KLA and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA 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 KLA Corporation 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.