Correlation Between ASML Holding and International Business

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

Diversification Opportunities for ASML Holding and International Business

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between ASMLF and International is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of ASML Holding i.e., ASML Holding and International Business go up and down completely randomly.

Pair Corralation between ASML Holding and International Business

Assuming the 90 days horizon ASML Holding NV is expected to generate 2.35 times more return on investment than International Business. However, ASML Holding is 2.35 times more volatile than International Business Machines. It trades about 0.13 of its potential returns per unit of risk. International Business Machines is currently generating about 0.18 per unit of risk. If you would invest  46,808  in ASML Holding NV on September 5, 2022 and sell it today you would earn a total of  13,067  from holding ASML Holding NV or generate 27.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy98.46%
ValuesDaily Returns

ASML Holding NV  vs.  International Business Machine

 Performance (%) 
       Timeline  
ASML Holding NV 
ASMLF Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating essential indicators, ASML Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

ASMLF Price Channel

International Business 
International Performance
14 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in International Business Machines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile fundamental drivers, International Business revealed solid returns over the last few months and may actually be approaching a breakup point.

International Price Channel

ASML Holding and International Business Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ASML Holding and International Business

The main advantage of trading using opposite ASML Holding and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.
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The idea behind ASML Holding NV and International Business Machines 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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