Correlation Between ASML Holding and Photronics

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

Diversification Opportunities for ASML Holding and Photronics

-0.22

Correlation Coefficient

ASML Holding  Photronics

Very good diversification

The 3 months correlation between ASML and Photronics is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Photronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Photronics 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 Photronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Photronics has no effect on the direction of ASML Holding i.e., ASML Holding and Photronics go up and down completely randomly.

Pair Corralation between ASML Holding and Photronics

Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the Photronics. In addition to that, ASML Holding is 1.12 times more volatile than Photronics. It trades about -0.06 of its total potential returns per unit of risk. Photronics is currently generating about 0.08 per unit of volatility. If you would invest  2,365  in Photronics on September 13, 2024 and sell it today you would earn a total of  262.00  from holding Photronics or generate 11.08% return on investment over 90 days.

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

ASML Holding NV  vs.  Photronics

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. Despite latest uncertain performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Photronics

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Photronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Photronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ASML Holding and Photronics

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

The idea behind ASML Holding NV and Photronics 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 Transaction History module to view history of all your transactions and understand their impact on performance.