Correlation Between KLA and ASML Holding

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

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

Diversification Opportunities for KLA and ASML Holding

0.85

Correlation Coefficient

KLA  ASML Holding

Very poor diversification

The 3 months correlation between KLA and ASML is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding KLA Corp. 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 KLA 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 KLA Corporation 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 KLA i.e., KLA and ASML Holding go up and down completely randomly.

Pair Corralation between KLA and ASML Holding

Assuming the 90 days horizon KLA Corporation is expected to generate 1.08 times more return on investment than ASML Holding. However, KLA is 1.08 times more volatile than ASML Holding NV. It trades about 0.05 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.02 per unit of risk. If you would invest  37,637  in KLA Corporation on September 4, 2024 and sell it today you would earn a total of  23,723  from holding KLA Corporation or generate 63.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.8%
Values	Daily Returns

KLA Corp.  vs.  ASML Holding NV

KLA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 KLA and ASML Holding

The main advantage of trading using opposite KLA and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA 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 KLA Corporation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.