Correlation Between Canadian Utilities and ASML Holding

Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and ASML Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canadian Utilities Limited and ASML Holding NV, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of ASML Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and ASML Holding.

Diversification Opportunities for Canadian Utilities and ASML Holding

-0.38

Correlation Coefficient

Canadian Utilities  ASML Holding

Very good diversification

The 3 months correlation between Canadian and ASML is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited 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 Canadian Utilities 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 Canadian Utilities Limited 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 Canadian Utilities i.e., Canadian Utilities and ASML Holding go up and down completely randomly.

Pair Corralation between Canadian Utilities and ASML Holding

Assuming the 90 days horizon Canadian Utilities is expected to generate 2.7 times less return on investment than ASML Holding. But when comparing it to its historical volatility, Canadian Utilities Limited is 1.94 times less risky than ASML Holding. It trades about 0.02 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  56,869  in ASML Holding NV on September 4, 2024 and sell it today you would earn a total of  8,321  from holding ASML Holding NV or generate 14.63% return on investment over 90 days.

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

Canadian Utilities Limited  vs.  ASML Holding NV

Canadian Utilities

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Canadian Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 fragile performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Canadian Utilities and ASML Holding

The main advantage of trading using opposite Canadian Utilities and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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 Canadian Utilities Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.