Correlation Between KLA Tencor and ASML Holding

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

Diversification Opportunities for KLA Tencor and ASML Holding

0.96

Correlation Coefficient

KLA Tencor  ASML Holding

Almost no diversification

The 3 months correlation between KLA and ASML is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding KLA Tencor 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 Tencor 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 Tencor 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 Tencor i.e., KLA Tencor and ASML Holding go up and down completely randomly.

Pair Corralation between KLA Tencor and ASML Holding

Given the investment horizon of 90 days KLA Tencor is expected to under-perform the ASML Holding. In addition to that, KLA Tencor is 1.11 times more volatile than ASML Holding NV. It trades about -0.2 of its total potential returns per unit of risk. ASML Holding NV is currently generating about -0.04 per unit of volatility. If you would invest  68,383  in ASML Holding NV on August 31, 2024 and sell it today you would lose (1,335) from holding ASML Holding NV or give up 1.95% of portfolio value over 90 days.

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

KLA Tencor  vs.  ASML Holding NV

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 uncertain performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with KLA Tencor and ASML Holding

The main advantage of trading using opposite KLA Tencor and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KLA Tencor 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 Tencor 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.