Correlation Between ASML Holding and KLA Tencor

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

Diversification Opportunities for ASML Holding and KLA Tencor

0.86

Correlation Coefficient

ASML Holding  KLA Tencor

Very poor diversification

The 3 months correlation between ASML and KLA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor 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 KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of ASML Holding i.e., ASML Holding and KLA Tencor go up and down completely randomly.

Pair Corralation between ASML Holding and KLA Tencor

Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the KLA Tencor. In addition to that, ASML Holding is 1.14 times more volatile than KLA Tencor. It trades about -0.22 of its total potential returns per unit of risk. KLA Tencor is currently generating about -0.22 per unit of volatility. If you would invest  69,595  in KLA Tencor on January 20, 2024 and sell it today you would lose (6,779) from holding KLA Tencor or give up 9.74% of portfolio value over 90 days.

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

ASML Holding NV  vs.  KLA Tencor

ASML Holding NV

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

KLA Tencor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KLA Tencor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, KLA Tencor is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ASML Holding and KLA Tencor

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

The idea behind ASML Holding NV and KLA Tencor 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.