Correlation Between ASML Holding and Tokyo Electron
Can any of the company-specific risk be diversified away by investing in both ASML Holding and Tokyo Electron 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 Tokyo Electron 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 Tokyo Electron, you can compare the effects of market volatilities on ASML Holding and Tokyo Electron 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 Tokyo Electron. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Tokyo Electron.
Diversification Opportunities for ASML Holding and Tokyo Electron
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ASML and Tokyo is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Tokyo Electron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electron 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 Tokyo Electron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electron has no effect on the direction of ASML Holding i.e., ASML Holding and Tokyo Electron go up and down completely randomly.
Pair Corralation between ASML Holding and Tokyo Electron
Given the investment horizon of 90 days ASML Holding is expected to generate 2.5 times less return on investment than Tokyo Electron. But when comparing it to its historical volatility, ASML Holding NV is 1.25 times less risky than Tokyo Electron. It trades about 0.02 of its potential returns per unit of risk. Tokyo Electron is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 11,587 in Tokyo Electron on October 25, 2024 and sell it today you would earn a total of 6,023 from holding Tokyo Electron or generate 51.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASML Holding NV vs. Tokyo Electron
Performance |
| Timeline |
| ASML Holding NV |
| Tokyo Electron |
ASML Holding and Tokyo Electron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASML Holding and Tokyo Electron
The main advantage of trading using opposite ASML Holding and Tokyo Electron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, Tokyo Electron 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 Tokyo Electron will offset losses from the drop in Tokyo Electron's long position.| ASML Holding vs. Applied Materials | ASML Holding vs. KLA Tencor | ASML Holding vs. Axcelis Technologies | ASML Holding vs. Teradyne |
| Tokyo Electron vs. United Natural Foods | Tokyo Electron vs. AMCON Distributing | Tokyo Electron vs. Ryanair Holdings PLC | Tokyo Electron vs. WK Kellogg Co |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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