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EUROSTOXX 50 (ESTX50)-composition and correlation with Apple Tree Fund

Financial Q1-results are (almost) in, and it’s time to deliver on our promise from last week. Some insight in the ‘other’ market index that Apple Tree uses for implementing its investment strategy: the European index, EURO STOXX 50 (ESTX50).

What is the ESTX50?

The EURO STOXX 50 is a stock index representing the performance of the 50 largest companies among the 20 largest sectors in terms of free-float market capitalization in the Eurozone. It holds stocks from nine eurozone countries. The index has a fixed number of components and is part of the STOXX blue-chip index family. The index captures about 60% of the free-float market cap of the EURO STOXX Total Market Index (TMI). The index is calculated, based on the underlying share prices, weighted by the free-float market cap.

Some key characteristics (and why Apple Tree uses the index)

  • Liquidity: one of the most liquid indices for the Eurozone: serves as underlying for financial products (options, futures, ETFs) and for benchmarking purposes.

  • Stability: buffers are used to achieve the fixed number of components and to maintain stability of the indices by controlling index composition changes.

  • Stability and liquidity: selection methodology ensures a stable and up-to-date index composition. Fast-exit rules ensure the index accurately represents the performance of only the largest and most liquid companies in a sector.


The composition methodology is slightly different from “just the 50 largest stocks”. In short, the largest 40 stocks of a selection list (based on the 20 EURO STOXX Supersector index) in terms of free-float market cap are selected. The remaining 10 stocks are selected from the largest remaining current stocks ranked between 41 and 60.

The actual company composition.

A quick glance at the landscape-graph above reveals that only 7 companies represent the top 1/3rd of the total index, with Louis Vuitton Moet Hennessy (LVMH) alone representing 10% of the index. It is the only European company that has crossed the half-trillion EURO mark! We only need to have 12 companies to account for more than 50% of the total index, leaving 38 companies for the remaining less than 50%. Almost all indices hold (some or more) concentration risk, and the ESTX50 is no different. Compare this to the AEX, for example, where we saw that ASML alone made up 21% of the index and the top 4 (of 25) companies represented more than 60% of the index.

Sectors then.

Perhaps not surprisingly considering the previous graph that over 40% is in consumer goods (cyclical and non-cyclical combined). Technology is almost 20% and financials just over 10%. This leaves 30% of the index for the remaining sectors Basic Materials (7.8%), Healthcare (4.7%), Energy (4.3%), Aerospace and Defence (3.9%), Industrials (3.3%), Utilities (3.2%), and Real Estate (0.3%). Personally, I am still surprised that energy is only 4.3% of the total.

And what about the country split?

Germany is the largest economy in the Eurozone (USD 3.9 trillion, 2022YE) by far. It is 1.5x(!) as big as the second economy, France (USD 2.6 trillion, 2022YE). And yet, what do we see in the index? France represents over 45% of the index, with Germany (a mere) 27.5%. And yay for the Netherlands, coming in 3rd (thank you Veldhoven) with a bit over 10% (and 5th largest economy in the Eurozone (USD 0.9 trillion, 2022YE)).

Considering all the above, it is not so surprising that the ESTX50 is more affected by a war that impacts consumers and less affected by an imploding tech bubble.

Correlation (updated)

Last month we gave you a pre-look in the correlation between Apple Tree Fund and the ESTX50. Just a quick reminder of how correlation can be interpreted.

Correlation can be graphically shown (see below) as well as captured in a number. This number is called R-squared and varies between -1 and +1. A value of +1 means a perfect correlation, or, if the index goes up, the Fund goes up. A value of -1 is the opposite, a perfect negative correlation. A value of 0 indicates that there is no correlation, or that the Fund moves ‘independently’ from the underlying index.

R-squared for the correlation between Apple Tree Fund and the ESTX50 is 0.027, or close to 0. In this case, that means that it does not matter if the index goes up or down, the Fund can still return a profit.

However, to still give you a glimpse ahead, we’ll take a quick look into correlation. Apple Tree Fund’s correlation with the ESTX50 is close to zero, meaning that the Fund moves ‘independently’ from the underlying index. The correlation measure R-squared for Apple Tree Fund – ESTX50 is 0.02. As was the case with AEX, it means that no matter what the ESTX50 does, the Fund can still return a profit.

Data: June 2020 – May 2023

Sources:,,, Apple Tree Capital Partners

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