Correlation Between Daido Steel and ASML Holding

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

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

Diversification Opportunities for Daido Steel and ASML Holding

-0.75

Correlation Coefficient

Daido Steel  ASML Holding

Pay attention - limited upside

The 3 months correlation between Daido and ASML is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Daido Steel Co 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 Daido Steel 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 Daido Steel Co 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 Daido Steel i.e., Daido Steel and ASML Holding go up and down completely randomly.

Pair Corralation between Daido Steel and ASML Holding

Assuming the 90 days horizon Daido Steel Co is expected to under-perform the ASML Holding. But the stock apears to be less risky and, when comparing its historical volatility, Daido Steel Co is 1.01 times less risky than ASML Holding. The stock trades about -0.07 of its potential returns per unit of risk. The ASML Holding NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  55,955  in ASML Holding NV on April 22, 2025 and sell it today you would earn a total of  6,445  from holding ASML Holding NV or generate 11.52% return on investment over 90 days.

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

Daido Steel Co  vs.  ASML Holding NV

Daido Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Daido Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ASML Holding NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, ASML Holding may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Daido Steel and ASML Holding

The main advantage of trading using opposite Daido Steel and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daido Steel 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 Daido Steel Co 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.