Correlation Between Diodes Incorporated and ASML Holding

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Can any of the company-specific risk be diversified away by investing in both Diodes Incorporated 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 Diodes Incorporated and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diodes Incorporated and ASML Holding NV, you can compare the effects of market volatilities on Diodes Incorporated 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 Diodes Incorporated with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diodes Incorporated and ASML Holding.

Diversification Opportunities for Diodes Incorporated and ASML Holding

  Correlation Coefficient

Very weak diversification

The 3 months correlation between Diodes and ASML is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Diodes Incorporated 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 Diodes Incorporated 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 Diodes Incorporated 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 Diodes Incorporated i.e., Diodes Incorporated and ASML Holding go up and down completely randomly.

Pair Corralation between Diodes Incorporated and ASML Holding

Given the investment horizon of 90 days Diodes Incorporated is expected to generate 1.25 times less return on investment than ASML Holding. In addition to that, Diodes Incorporated is 1.16 times more volatile than ASML Holding NV. It trades about 0.08 of its total potential returns per unit of risk. ASML Holding NV is currently generating about 0.12 per unit of volatility. If you would invest  66,198  in ASML Holding NV on March 6, 2023 and sell it today you would earn a total of  6,267  from holding ASML Holding NV or generate 9.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Diodes Incorporated  vs.  ASML Holding NV

 Performance (%) 
Diodes Incorporated 

Diodes Performance

1 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Diodes Incorporated are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Diodes Incorporated is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
ASML Holding NV 

ASML Performance

10 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Diodes Incorporated and ASML Holding Volatility Contrast

   Predicted Return Density   

Pair Trading with Diodes Incorporated and ASML Holding

The main advantage of trading using opposite Diodes Incorporated and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diodes Incorporated 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.
The idea behind Diodes Incorporated and ASML Holding NV 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.

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