Correlation Between Koninklijke Philips and ASML Holding

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

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

Diversification Opportunities for Koninklijke Philips and ASML Holding

-0.26

Correlation Coefficient

Koninklijke Philips  ASML Holding

Very good diversification

The 3 months correlation between Koninklijke and ASML is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Koninklijke Philips NV 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 Koninklijke Philips 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 Koninklijke Philips NV 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 Koninklijke Philips i.e., Koninklijke Philips and ASML Holding go up and down completely randomly.

Pair Corralation between Koninklijke Philips and ASML Holding

Assuming the 90 days trading horizon Koninklijke Philips is expected to generate 2.82 times less return on investment than ASML Holding. But when comparing it to its historical volatility, Koninklijke Philips NV is 1.48 times less risky than ASML Holding. It trades about 0.05 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  55,936  in ASML Holding NV on April 20, 2025 and sell it today you would earn a total of  7,414  from holding ASML Holding NV or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Koninklijke Philips NV  vs.  ASML Holding NV

Koninklijke Philips

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Philips NV are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Koninklijke Philips is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 comparatively weak basic indicators, ASML Holding unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Koninklijke Philips and ASML Holding

The main advantage of trading using opposite Koninklijke Philips and ASML Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Koninklijke Philips 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 Koninklijke Philips NV 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.