Correlation Between ASML Holding and Teradyne

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

Diversification Opportunities for ASML Holding and Teradyne

0.29

Correlation Coefficient

ASML Holding  Teradyne

Modest diversification

The 3 months correlation between ASML and Teradyne is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Teradyne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teradyne 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 Teradyne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teradyne has no effect on the direction of ASML Holding i.e., ASML Holding and Teradyne go up and down completely randomly.

Pair Corralation between ASML Holding and Teradyne

Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the Teradyne. In addition to that, ASML Holding is 1.07 times more volatile than Teradyne. It trades about -0.16 of its total potential returns per unit of risk. Teradyne is currently generating about -0.16 per unit of volatility. If you would invest  10,890  in Teradyne on January 25, 2024 and sell it today you would lose (905.00) from holding Teradyne or give up 8.31% of portfolio value over 90 days.

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

ASML Holding NV  vs.  Teradyne

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.

Teradyne

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teradyne has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest uncertain performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with ASML Holding and Teradyne

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

The idea behind ASML Holding NV and Teradyne 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.