Correlation Between ASML Holding and SP Midcap

Can any of the company-specific risk be diversified away by investing in both ASML Holding and SP Midcap 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 SP Midcap 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 SP Midcap 400, you can compare the effects of market volatilities on ASML Holding and SP Midcap 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 SP Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and SP Midcap.

Diversification Opportunities for ASML Holding and SP Midcap

0.46

Correlation Coefficient

ASML Holding  SP Midcap

Very weak diversification

The 3 months correlation between ASML and MID is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and SP Midcap 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Midcap 400 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 SP Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Midcap 400 has no effect on the direction of ASML Holding i.e., ASML Holding and SP Midcap go up and down completely randomly.

Pair Corralation between ASML Holding and SP Midcap

Given the investment horizon of 90 days ASML Holding is expected to generate 2.34 times less return on investment than SP Midcap. In addition to that, ASML Holding is 2.11 times more volatile than SP Midcap 400. It trades about 0.02 of its total potential returns per unit of risk. SP Midcap 400 is currently generating about 0.11 per unit of volatility. If you would invest  290,554  in SP Midcap 400 on May 6, 2025 and sell it today you would earn a total of  19,906  from holding SP Midcap 400 or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

ASML Holding NV  vs.  SP Midcap 400

Pair Trading with ASML Holding and SP Midcap

The main advantage of trading using opposite ASML Holding and SP Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, SP Midcap 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 SP Midcap will offset losses from the drop in SP Midcap's long position.

The idea behind ASML Holding NV and SP Midcap 400 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.