Correlation Between Trio Tech and ASML Holding

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

Diversification Opportunities for Trio Tech and ASML Holding

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Trio and ASML is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Trio Tech International 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 Trio Tech 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 Trio Tech International 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 Trio Tech i.e., Trio Tech and ASML Holding go up and down completely randomly.

Pair Corralation between Trio Tech and ASML Holding

Considering the 90-day investment horizon Trio Tech is expected to generate 1.02 times less return on investment than ASML Holding. In addition to that, Trio Tech is 1.28 times more volatile than ASML Holding NV. It trades about 0.04 of its total potential returns per unit of risk. ASML Holding NV is currently generating about 0.05 per unit of volatility. If you would invest  94,134  in ASML Holding NV on January 17, 2024 and sell it today you would earn a total of  1,348  from holding ASML Holding NV or generate 1.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Trio Tech International  vs.  ASML Holding NV

 Performance 
       Timeline  
Trio Tech International 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Trio Tech International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Trio Tech unveiled solid returns over the last few months and may actually be approaching a breakup point.
ASML Holding NV 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, ASML Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Trio Tech and ASML Holding Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Trio Tech and ASML Holding

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

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