Correlation Between Honda and ASML Holding

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

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

Diversification Opportunities for Honda and ASML Holding

-0.51

Correlation Coefficient

Honda  ASML Holding

Excellent diversification

The 3 months correlation between Honda and ASML is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor 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 Honda 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 Honda Motor 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 Honda i.e., Honda and ASML Holding go up and down completely randomly.

Pair Corralation between Honda and ASML Holding

Assuming the 90 days trading horizon Honda Motor Co is expected to under-perform the ASML Holding. But the stock apears to be less risky and, when comparing its historical volatility, Honda Motor Co is 1.27 times less risky than ASML Holding. The stock trades about 0.0 of its potential returns per unit of risk. The ASML Holding NV is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,837  in ASML Holding NV on April 23, 2025 and sell it today you would earn a total of  414.00  from holding ASML Holding NV or generate 6.06% return on investment over 90 days.

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

Honda Motor Co  vs.  ASML Holding NV

Honda Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honda Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Honda is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

ASML Holding NV

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, ASML Holding may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Honda and ASML Holding

The main advantage of trading using opposite Honda and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda 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 Honda Motor 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.