Correlation Between Ultra Clean and ASML Holding

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

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

Diversification Opportunities for Ultra Clean and ASML Holding

0.73

Correlation Coefficient

Ultra Clean  ASML Holding

Poor diversification

The 3 months correlation between Ultra and ASML is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Clean Holdings 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 Ultra Clean 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 Ultra Clean Holdings 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 Ultra Clean i.e., Ultra Clean and ASML Holding go up and down completely randomly.

Pair Corralation between Ultra Clean and ASML Holding

Assuming the 90 days horizon Ultra Clean Holdings is expected to under-perform the ASML Holding. In addition to that, Ultra Clean is 1.84 times more volatile than ASML Holding NV. It trades about -0.16 of its total potential returns per unit of risk. ASML Holding NV is currently generating about -0.04 per unit of volatility. If you would invest  67,564  in ASML Holding NV on December 30, 2024 and sell it today you would lose (5,014) from holding ASML Holding NV or give up 7.42% of portfolio value over 90 days.

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

Ultra Clean Holdings  vs.  ASML Holding NV

Ultra Clean Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ultra Clean Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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. In spite of rather sound technical and fundamental indicators, ASML Holding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ultra Clean and ASML Holding

The main advantage of trading using opposite Ultra Clean and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Clean 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 Ultra Clean Holdings 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.