Correlation Between Microsoft and ASML HOLDING

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

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

Diversification Opportunities for Microsoft and ASML HOLDING

0.47

Correlation Coefficient

Microsoft  ASML HOLDING

Very weak diversification

The 3 months correlation between Microsoft and ASML is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and ASML HOLDING NY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML HOLDING NY and Microsoft 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 Microsoft 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 NY has no effect on the direction of Microsoft i.e., Microsoft and ASML HOLDING go up and down completely randomly.

Pair Corralation between Microsoft and ASML HOLDING

Given the investment horizon of 90 days Microsoft is expected to under-perform the ASML HOLDING. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.57 times less risky than ASML HOLDING. The stock trades about -0.08 of its potential returns per unit of risk. The ASML HOLDING NY is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  67,059  in ASML HOLDING NY on December 29, 2024 and sell it today you would lose (3,459) from holding ASML HOLDING NY or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Microsoft  vs.  ASML HOLDING NY

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ASML HOLDING NY

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASML HOLDING NY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary 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 Microsoft and ASML HOLDING

The main advantage of trading using opposite Microsoft and ASML HOLDING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft and ASML HOLDING NY 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.