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
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and ASML is -0.17. 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 2.3 times less return on investment than ASML Holding. But when comparing it to its historical volatility, Ford Motor is 1.08 times less risky than ASML Holding. It trades about 0.01 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 58,255 in ASML Holding NV on August 27, 2024 and sell it today you would earn a total of 9,033 from holding ASML Holding NV or generate 15.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| 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. Applied Materials | ASML Holding vs. KLA Tencor | ASML Holding vs. Axcelis Technologies | ASML Holding 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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