Correlation Between Sociedad Quimica and ASML Holding

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

Diversification Opportunities for Sociedad Quimica and ASML Holding

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Sociedad and ASML is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Quimica Y 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 Sociedad Quimica 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 Sociedad Quimica Y 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 Sociedad Quimica i.e., Sociedad Quimica and ASML Holding go up and down completely randomly.

Pair Corralation between Sociedad Quimica and ASML Holding

Considering the 90-day investment horizon Sociedad Quimica Y is expected to under-perform the ASML Holding. In addition to that, Sociedad Quimica is 1.3 times more volatile than ASML Holding NV. It trades about -0.02 of its total potential returns per unit of risk. ASML Holding NV is currently generating about 0.06 per unit of volatility. If you would invest  56,872  in ASML Holding NV on December 29, 2023 and sell it today you would earn a total of  40,529  from holding ASML Holding NV or generate 71.26% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sociedad Quimica Y  vs.  ASML Holding NV

 Performance 
       Timeline  
Sociedad Quimica Y 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Sociedad Quimica Y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
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 unsteady primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Sociedad Quimica and ASML Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sociedad Quimica and ASML Holding

The main advantage of trading using opposite Sociedad Quimica and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sociedad Quimica 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 Sociedad Quimica Y 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.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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