Correlation Between Advanced Micro and ASML Holding
Can any of the company-specific risk be diversified away by investing in both Advanced Micro 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 Advanced Micro and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advanced Micro Devices and ASML Holding NV, you can compare the effects of market volatilities on Advanced Micro 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 Advanced Micro with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advanced Micro and ASML Holding.
Diversification Opportunities for Advanced Micro and ASML Holding
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Advanced and ASML is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Micro Devices 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 Advanced Micro 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 Advanced Micro Devices 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 Advanced Micro i.e., Advanced Micro and ASML Holding go up and down completely randomly.
Pair Corralation between Advanced Micro and ASML Holding
Considering the 90-day investment horizon Advanced Micro Devices is expected to under-perform the ASML Holding. In addition to that, Advanced Micro is 1.19 times more volatile than ASML Holding NV. It trades about -0.23 of its total potential returns per unit of risk. ASML Holding NV is currently generating about -0.15 per unit of volatility. If you would invest 97,130 in ASML Holding NV on January 26, 2024 and sell it today you would lose (7,898) from holding ASML Holding NV or give up 8.13% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Advanced Micro Devices vs. ASML Holding NV
Performance |
Timeline |
Advanced Micro Devices |
ASML Holding NV |
Advanced Micro and ASML Holding Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Advanced Micro and ASML Holding
The main advantage of trading using opposite Advanced Micro and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Micro 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.Advanced Micro vs. Taiwan Semiconductor Manufacturing | Advanced Micro vs. Intel | Advanced Micro vs. Marvell Technology Group | Advanced Micro vs. Micron Technology |
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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 the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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