Correlation Between ASML Holding and AutoZone

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

Diversification Opportunities for ASML Holding and AutoZone

0.65

Correlation Coefficient

ASML Holding  AutoZone

Poor diversification

The 3 months correlation between ASML and AutoZone is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and AutoZone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoZone 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 AutoZone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoZone has no effect on the direction of ASML Holding i.e., ASML Holding and AutoZone go up and down completely randomly.

Pair Corralation between ASML Holding and AutoZone

Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the AutoZone. In addition to that, ASML Holding is 2.76 times more volatile than AutoZone. It trades about -0.15 of its total potential returns per unit of risk. AutoZone is currently generating about -0.32 per unit of volatility. If you would invest  319,148  in AutoZone on January 26, 2024 and sell it today you would lose (20,297) from holding AutoZone or give up 6.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

ASML Holding NV  vs.  AutoZone

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

AutoZone

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AutoZone are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, AutoZone may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ASML Holding and AutoZone

The main advantage of trading using opposite ASML Holding and AutoZone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, AutoZone 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 AutoZone will offset losses from the drop in AutoZone's long position.

The idea behind ASML Holding NV and AutoZone 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.