Correlation Between Ford and ASML Holding
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and ASML Holding NV, you can compare the effects of market volatilities on Ford 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 Ford with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and ASML Holding.
Diversification Opportunities for Ford and ASML Holding
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and ASML is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and ASML Holding go up and down completely randomly.
Pair Corralation between Ford and ASML Holding
Taking into account the 90-day investment horizon Ford is expected to generate 1.76 times less return on investment than ASML Holding. In addition to that, Ford is 1.02 times more volatile than ASML Holding NV. It trades about 0.01 of its total potential returns per unit of risk. ASML Holding NV is currently generating about 0.03 per unit of volatility. If you would invest 55,512 in ASML Holding NV on August 28, 2024 and sell it today you would earn a total of 9,688 from holding ASML Holding NV or generate 17.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.21% |
| Values | Daily Returns |
Ford Motor vs. ASML Holding NV
Performance |
| Timeline |
| Ford Motor |
| ASML Holding NV |
Ford and ASML Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and ASML Holding
The main advantage of trading using opposite Ford and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| ASML Holding vs. Adyen NV | ASML Holding vs. Prosus NV | ASML Holding vs. Koninklijke Philips NV | ASML Holding vs. Koninklijke Ahold Delhaize |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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