Correlation Between ASML Holding and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both ASML Holding and Alcoa 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 Holding and Alcoa Corp 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 Alcoa Corp, you can compare the effects of market volatilities on ASML Holding and Alcoa 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 Holding with a short position of Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASML Holding and Alcoa Corp.
Diversification Opportunities for ASML Holding and Alcoa Corp
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ASML and Alcoa is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of ASML Holding i.e., ASML Holding and Alcoa Corp go up and down completely randomly.
Pair Corralation between ASML Holding and Alcoa Corp
Assuming the 90 days trading horizon ASML Holding NV is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, ASML Holding NV is 1.28 times less risky than Alcoa Corp. The stock trades about -0.22 of its potential returns per unit of risk. The Alcoa Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,186 in Alcoa Corp on January 25, 2024 and sell it today you would earn a total of 434.00 from holding Alcoa Corp or generate 13.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
ASML Holding NV vs. Alcoa Corp
Performance |
| Timeline |
| ASML Holding NV |
| Alcoa Corp |
ASML Holding and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASML Holding and Alcoa Corp
The main advantage of trading using opposite ASML Holding and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, Alcoa 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| ASML Holding vs. NX Filtration Holding | ASML Holding vs. BenevolentAI SA | ASML Holding vs. NedSense Enterprises NV | ASML Holding vs. Bever Holding NV |
| Alcoa Corp vs. Constellium Nv | Alcoa Corp vs. Century Aluminum | Alcoa Corp vs. China Hongqiao Group | Alcoa Corp vs. Kaiser Aluminum |
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 the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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