Correlation Between Microsoft and ASML Holding

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

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

Diversification Opportunities for Microsoft and ASML Holding

0.68

Correlation Coefficient

Microsoft  ASML Holding

Poor diversification

The 3 months correlation between Microsoft and ASML is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and ASML Holding go up and down completely randomly.

Pair Corralation between Microsoft and ASML Holding

Assuming the 90 days trading horizon Microsoft is expected to generate 0.6 times more return on investment than ASML Holding. However, Microsoft is 1.66 times less risky than ASML Holding. It trades about 0.31 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.04 per unit of risk. If you would invest  9,133  in Microsoft on April 24, 2025 and sell it today you would earn a total of  2,467  from holding Microsoft or generate 27.01% return on investment over 90 days.

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

Microsoft  vs.  ASML Holding NV

Microsoft

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Microsoft are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Microsoft sustained solid returns over the last few months and may actually be approaching a breakup point.

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 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, ASML Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and ASML Holding

The main advantage of trading using opposite Microsoft and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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 Microsoft 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.