Correlation Between Disney and ASML Holding

Can any of the company-specific risk be diversified away by investing in both Disney 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 Disney and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walt Disney and ASML Holding NV, you can compare the effects of market volatilities on Disney 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 Disney with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disney and ASML Holding.

Diversification Opportunities for Disney and ASML Holding

0.77

Correlation Coefficient

Disney  ASML Holding

Poor diversification

The 3 months correlation between Disney and ASML is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney 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 Disney 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 Walt Disney 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 Disney i.e., Disney and ASML Holding go up and down completely randomly.

Pair Corralation between Disney and ASML Holding

Considering the 90-day investment horizon Walt Disney is expected to generate 0.48 times more return on investment than ASML Holding. However, Walt Disney is 2.08 times less risky than ASML Holding. It trades about -0.19 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.15 per unit of risk. If you would invest  11,993  in Walt Disney on January 26, 2024 and sell it today you would lose (601.00) from holding Walt Disney or give up 5.01% of portfolio value over 90 days.

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

Walt Disney  vs.  ASML Holding NV

Walt Disney

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Disney and ASML Holding

The main advantage of trading using opposite Disney and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.