Correlation Between Microsoft and NTT DATA

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

By analyzing existing cross correlation between Microsoft and NTT DATA , you can compare the effects of market volatilities on Microsoft and NTT DATA 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 NTT DATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and NTT DATA.

Diversification Opportunities for Microsoft and NTT DATA

0.6

Correlation Coefficient

Microsoft  NTT DATA

Poor diversification

The 3 months correlation between Microsoft and NTT is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and NTT DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT DATA 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 NTT DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT DATA has no effect on the direction of Microsoft i.e., Microsoft and NTT DATA go up and down completely randomly.

Pair Corralation between Microsoft and NTT DATA

Assuming the 90 days trading horizon Microsoft is expected to under-perform the NTT DATA. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.23 times less risky than NTT DATA. The stock trades about -0.15 of its potential returns per unit of risk. The NTT DATA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,812  in NTT DATA on December 30, 2024 and sell it today you would lose (152.00) from holding NTT DATA or give up 8.39% of portfolio value over 90 days.

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

Microsoft  vs.  NTT DATA

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NTT DATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTT DATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Microsoft and NTT DATA

The main advantage of trading using opposite Microsoft and NTT DATA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, NTT DATA 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 NTT DATA will offset losses from the drop in NTT DATA's long position.

The idea behind Microsoft and NTT DATA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.