Correlation Between ASML Holding and Applied Materials
Can any of the company-specific risk be diversified away by investing in both ASML Holding and Applied Materials 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 ASML Holding and Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASML Holding NV and Applied Materials, you can compare the effects of market volatilities on ASML Holding and Applied Materials 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 ASML Holding with a short position of Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Applied Materials.
Diversification Opportunities for ASML Holding and Applied Materials
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between ASML and Applied is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials and ASML Holding 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 ASML Holding NV are associated (or correlated) with Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of ASML Holding i.e., ASML Holding and Applied Materials go up and down completely randomly.
Pair Corralation between ASML Holding and Applied Materials
Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the Applied Materials. In addition to that, ASML Holding is 1.08 times more volatile than Applied Materials. It trades about -0.05 of its total potential returns per unit of risk. Applied Materials is currently generating about -0.05 per unit of volatility. If you would invest 20,068 in Applied Materials on November 1, 2024 and sell it today you would lose (2,540) from holding Applied Materials or give up 12.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASML Holding NV vs. Applied Materials
Performance |
| Timeline |
| ASML Holding NV |
| Applied Materials |
ASML Holding and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASML Holding and Applied Materials
The main advantage of trading using opposite ASML Holding and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| ASML Holding vs. Applied Materials | ASML Holding vs. KLA Tencor | ASML Holding vs. Axcelis Technologies | ASML Holding vs. Teradyne |
| Applied Materials vs. KLA Tencor | Applied Materials vs. ASML Holding NV | Applied Materials vs. Axcelis Technologies | Applied Materials vs. Teradyne |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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