Correlation Between Axcelis Technologies and ASML Holding

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

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

Diversification Opportunities for Axcelis Technologies and ASML Holding

0.82

Correlation Coefficient

Axcelis Technologies ASML Holding

Very poor diversification

The 3 months correlation between Axcelis and ASML is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Axcelis Technologies 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 Axcelis Technologies 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 Axcelis Technologies 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 Axcelis Technologies i.e., Axcelis Technologies and ASML Holding go up and down completely randomly.

Pair Corralation between Axcelis Technologies and ASML Holding

Given the investment horizon of 90 days Axcelis Technologies is expected to generate 1.41 times more return on investment than ASML Holding. However, Axcelis Technologies is 1.41 times more volatile than ASML Holding NV. It trades about 0.48 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.25 per unit of risk. If you would invest  12,020  in Axcelis Technologies on March 6, 2023 and sell it today you would earn a total of  4,216  from holding Axcelis Technologies or generate 35.07% return on investment over 90 days.

Axcelis Technologies  vs.  ASML Holding NV

Axcelis Technologies

Axcelis Performance

10 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Axcelis Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal essential indicators, Axcelis Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

ASML Holding NV

ASML Performance

10 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axcelis Technologies and ASML Holding

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

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.