Correlation Between ASML Holding and Universal

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

Diversification Opportunities for ASML Holding and Universal

-0.79
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ASML and Universal is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of ASML Holding i.e., ASML Holding and Universal go up and down completely randomly.

Pair Corralation between ASML Holding and Universal

Given the investment horizon of 90 days ASML Holding is expected to generate 1.91 times less return on investment than Universal. In addition to that, ASML Holding is 1.99 times more volatile than Universal. It trades about 0.07 of its total potential returns per unit of risk. Universal is currently generating about 0.26 per unit of volatility. If you would invest  4,833  in Universal on December 29, 2023 and sell it today you would earn a total of  339.00  from holding Universal or generate 7.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

ASML Holding NV  vs.  Universal

 Performance 
       Timeline  
ASML Holding NV 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.
Universal 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Universal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

ASML Holding and Universal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ASML Holding and Universal

The main advantage of trading using opposite ASML Holding and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, Universal 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 Universal will offset losses from the drop in Universal's long position.
The idea behind ASML Holding NV and Universal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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