Correlation Between ASML Holding and Qualcomm Incorporated

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

Diversification Opportunities for ASML Holding and Qualcomm Incorporated

0.59

Correlation Coefficient

ASML Holding  Qualcomm Incorporated

Very weak diversification

The 3 months correlation between ASML and Qualcomm is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ASML Holding NV and Qualcomm Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qualcomm Incorporated 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 Qualcomm Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qualcomm Incorporated has no effect on the direction of ASML Holding i.e., ASML Holding and Qualcomm Incorporated go up and down completely randomly.

Pair Corralation between ASML Holding and Qualcomm Incorporated

Given the investment horizon of 90 days ASML Holding NV is expected to under-perform the Qualcomm Incorporated. In addition to that, ASML Holding is 1.02 times more volatile than Qualcomm Incorporated. It trades about -0.08 of its total potential returns per unit of risk. Qualcomm Incorporated is currently generating about 0.11 per unit of volatility. If you would invest  16,976  in Qualcomm Incorporated on February 4, 2024 and sell it today you would earn a total of  988.00  from holding Qualcomm Incorporated or generate 5.82% return on investment over 90 days.

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

ASML Holding NV  vs.  Qualcomm Incorporated

ASML Holding NV

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, ASML Holding is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Qualcomm Incorporated

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qualcomm Incorporated are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Qualcomm Incorporated displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ASML Holding and Qualcomm Incorporated

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

The idea behind ASML Holding NV and Qualcomm Incorporated 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.