Correlation Between Applied Materials and ASML Holding
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and ASML Holding NV, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and ASML Holding.
Diversification Opportunities for Applied Materials and ASML Holding
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and ASML is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and ASML Holding go up and down completely randomly.
Pair Corralation between Applied Materials and ASML Holding
Given the investment horizon of 90 days Applied Materials is expected to generate 1.41 times more return on investment than ASML Holding. However, Applied Materials is 1.41 times more volatile than ASML Holding NV. It trades about -0.05 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.11 per unit of risk. If you would invest 18,227 in Applied Materials on August 24, 2024 and sell it today you would lose (652.00) from holding Applied Materials or give up 3.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. ASML Holding NV
Performance |
| Timeline |
| Applied Materials |
| ASML Holding NV |
Applied Materials and ASML Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and ASML Holding
The main advantage of trading using opposite Applied Materials and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
| ASML Holding vs. Sumco Corp ADR | ASML Holding vs. Disco Corp ADR | ASML Holding vs. Tokyo Electron | ASML Holding vs. AIXTRON SE |
Check out your portfolio center.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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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