Correlation Between Technology Telecommunicatio and ASML Holding

Can any of the company-specific risk be diversified away by investing in both Technology Telecommunicatio 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 Technology Telecommunicatio and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Technology Telecommunication and ASML Holding NV, you can compare the effects of market volatilities on Technology Telecommunicatio 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 Technology Telecommunicatio with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Telecommunicatio and ASML Holding.

Diversification Opportunities for Technology Telecommunicatio and ASML Holding

-0.67

Correlation Coefficient

Technology Telecommunicatio  ASML Holding

Excellent diversification

The 3 months correlation between Technology and ASML is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Technology Telecommunication 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 Technology Telecommunicatio 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 Technology Telecommunication 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 Technology Telecommunicatio i.e., Technology Telecommunicatio and ASML Holding go up and down completely randomly.

Pair Corralation between Technology Telecommunicatio and ASML Holding

Given the investment horizon of 90 days Technology Telecommunication is expected to generate 0.44 times more return on investment than ASML Holding. However, Technology Telecommunication is 2.3 times less risky than ASML Holding. It trades about 0.11 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.03 per unit of risk. If you would invest  1,092  in Technology Telecommunication on February 5, 2025 and sell it today you would earn a total of  108.00  from holding Technology Telecommunication or generate 9.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Technology Telecommunication  vs.  ASML Holding NV

Technology Telecommunicatio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Technology Telecommunication are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Technology Telecommunicatio may actually be approaching a critical reversion point that can send shares even higher in June 2025.

ASML Holding NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, ASML Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Technology Telecommunicatio and ASML Holding

The main advantage of trading using opposite Technology Telecommunicatio and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Telecommunicatio 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 Technology Telecommunication 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.