Correlation Between ASML Holding and Unilever PLC

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

Diversification Opportunities for ASML Holding and Unilever PLC

0.62

Correlation Coefficient

ASML Holding  Unilever PLC

Poor diversification

The 3 months correlation between ASML and Unilever is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC 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 Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of ASML Holding i.e., ASML Holding and Unilever PLC go up and down completely randomly.

Pair Corralation between ASML Holding and Unilever PLC

Assuming the 90 days trading horizon ASML Holding NV is expected to under-perform the Unilever PLC. In addition to that, ASML Holding is 3.13 times more volatile than Unilever PLC. It trades about -0.03 of its total potential returns per unit of risk. Unilever PLC is currently generating about -0.05 per unit of volatility. If you would invest  5,813  in Unilever PLC on September 13, 2024 and sell it today you would lose (201.00) from holding Unilever PLC or give up 3.46% of portfolio value over 90 days.

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

ASML Holding NV  vs.  Unilever PLC

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 comparatively stable basic indicators, ASML Holding is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Unilever PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ASML Holding and Unilever PLC

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

The idea behind ASML Holding NV and Unilever PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.