Correlation Between Aehr Test and ASML Holding

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

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

Diversification Opportunities for Aehr Test and ASML Holding

-0.24

Correlation Coefficient

Aehr Test  ASML Holding

Very good diversification

The 3 months correlation between Aehr and ASML is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Aehr Test Systems 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 Aehr Test 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 Aehr Test Systems 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 Aehr Test i.e., Aehr Test and ASML Holding go up and down completely randomly.

Pair Corralation between Aehr Test and ASML Holding

Given the investment horizon of 90 days Aehr Test Systems is expected to generate 1.33 times more return on investment than ASML Holding. However, Aehr Test is 1.33 times more volatile than ASML Holding NV. It trades about -0.09 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.14 per unit of risk. If you would invest  1,137  in Aehr Test Systems on January 25, 2024 and sell it today you would lose (81.00) from holding Aehr Test Systems or give up 7.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aehr Test Systems  vs.  ASML Holding NV

Aehr Test Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ASML Holding NV

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, ASML Holding is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Aehr Test and ASML Holding

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

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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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.