Correlation Between Asml Holdings and Microsoft Corp

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Can any of the company-specific risk be diversified away by investing in both Asml Holdings and Microsoft Corp 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 Holdings and Microsoft Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Asml Holdings NY and Microsoft Corp, you can compare the effects of market volatilities on Asml Holdings and Microsoft Corp 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 Holdings with a short position of Microsoft Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asml Holdings and Microsoft Corp.

Diversification Opportunities for Asml Holdings and Microsoft Corp

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Asml Holdings and Microsoft is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Asml Holdings NY and Microsoft Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft Corp and Asml Holdings 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 Holdings NY are associated (or correlated) with Microsoft Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft Corp has no effect on the direction of Asml Holdings i.e., Asml Holdings and Microsoft Corp go up and down completely randomly.

Pair Corralation between Asml Holdings and Microsoft Corp

Given the investment horizon of 90 days Asml Holdings NY is expected to generate 1.57 times more return on investment than Microsoft Corp. However, Asml Holdings is 1.57 times more volatile than Microsoft Corp. It trades about 0.03 of its potential returns per unit of risk. Microsoft Corp is currently generating about 0.03 per unit of risk. If you would invest  46,169  in Asml Holdings NY on August 29, 2022 and sell it today you would earn a total of  13,015  from holding Asml Holdings NY or generate 28.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Asml Holdings NY  vs.  Microsoft Corp

 Performance (%) 
       Timeline  
Asml Holdings NY 
Asml Holdings Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Asml Holdings NY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, Asml Holdings revealed solid returns over the last few months and may actually be approaching a breakup point.

Asml Holdings Price Channel

Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Asml Holdings and Microsoft Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Asml Holdings and Microsoft Corp

The main advantage of trading using opposite Asml Holdings and Microsoft Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Asml Holdings position performs unexpectedly, Microsoft Corp 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 Microsoft Corp will offset losses from the drop in Microsoft Corp's long position.
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The idea behind Asml Holdings NY and Microsoft Corp 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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