Correlation Between Tesla and ASML Holding
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and ASML Holding NV, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and ASML Holding.
Diversification Opportunities for Tesla and ASML Holding
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tesla and ASML is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc 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 Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and ASML Holding go up and down completely randomly.
Pair Corralation between Tesla and ASML Holding
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.64 times more return on investment than ASML Holding. However, Tesla is 1.64 times more volatile than ASML Holding NV. It trades about 0.17 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.15 per unit of risk. If you would invest 25,422 in Tesla Inc on August 27, 2024 and sell it today you would earn a total of 9,834 from holding Tesla Inc or generate 38.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. ASML Holding NV
Performance |
| Timeline |
| Tesla Inc |
| ASML Holding NV |
Tesla and ASML Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and ASML Holding
The main advantage of trading using opposite Tesla and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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