Correlation Between ASML Holding and Universal Display

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

Diversification Opportunities for ASML Holding and Universal Display

0.49

Correlation Coefficient

ASML Holding  Universal Display

Very weak diversification

The 3 months correlation between ASML and Universal is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of ASML Holding i.e., ASML Holding and Universal Display go up and down completely randomly.

Pair Corralation between ASML Holding and Universal Display

Assuming the 90 days trading horizon ASML Holding NV is expected to under-perform the Universal Display. In addition to that, ASML Holding is 1.28 times more volatile than Universal Display. It trades about -0.07 of its total potential returns per unit of risk. Universal Display is currently generating about -0.03 per unit of volatility. If you would invest  16,374  in Universal Display on September 3, 2024 and sell it today you would lose (1,174) from holding Universal Display or give up 7.17% of portfolio value over 90 days.

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

ASML Holding NV  vs.  Universal Display

ASML Holding NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Universal Display

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Display has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Universal Display is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASML Holding and Universal Display

The main advantage of trading using opposite ASML Holding and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASML Holding position performs unexpectedly, Universal Display 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 Display will offset losses from the drop in Universal Display's long position.

The idea behind ASML Holding NV and Universal Display 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.