Correlation Between ASM International and Microsoft

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

Diversification Opportunities for ASM International and Microsoft

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between ASMIY and Microsoft is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ASM International NV and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and ASM International 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 ASM International NV are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of ASM International i.e., ASM International and Microsoft go up and down completely randomly.

Pair Corralation between ASM International and Microsoft

Assuming the 90 days horizon ASM International NV is expected to generate 1.45 times more return on investment than Microsoft. However, ASM International is 1.45 times more volatile than Microsoft. It trades about 0.05 of its potential returns per unit of risk. Microsoft is currently generating about 0.02 per unit of risk. If you would invest  26,450  in ASM International NV on September 4, 2022 and sell it today you would earn a total of  2,370  from holding ASM International NV or generate 8.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy98.44%
ValuesDaily Returns

ASM International NV  vs.  Microsoft

 Performance (%) 
       Timeline  
ASM International 
ASMIY Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ASM International NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish forward indicators, ASM International showed solid returns over the last few months and may actually be approaching a breakup point.

ASMIY Price Channel

Microsoft 
Microsoft Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Microsoft 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

ASM International and Microsoft Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ASM International and Microsoft

The main advantage of trading using opposite ASM International and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASM International position performs unexpectedly, Microsoft 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 will offset losses from the drop in Microsoft's long position.
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The idea behind ASM International NV and Microsoft 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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