Correlation Between Microsoft and Nordea Bank

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

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

Diversification Opportunities for Microsoft and Nordea Bank

-0.09

Correlation Coefficient

Microsoft  Nordea Bank

Good diversification

The 3 months correlation between Microsoft and Nordea is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nordea Bank Abp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordea Bank Abp 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 Nordea Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordea Bank Abp has no effect on the direction of Microsoft i.e., Microsoft and Nordea Bank go up and down completely randomly.

Pair Corralation between Microsoft and Nordea Bank

Given the investment horizon of 90 days Microsoft is expected to generate 1.03 times more return on investment than Nordea Bank. However, Microsoft is 1.03 times more volatile than Nordea Bank Abp. It trades about 0.05 of its potential returns per unit of risk. Nordea Bank Abp is currently generating about 0.03 per unit of risk. If you would invest  40,862  in Microsoft on August 31, 2024 and sell it today you would earn a total of  1,437  from holding Microsoft or generate 3.52% return on investment over 90 days.

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

Microsoft  vs.  Nordea Bank Abp

Microsoft

Risk-Adjusted Performance

3 of 100

Weak

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

Nordea Bank Abp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordea Bank Abp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nordea Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and Nordea Bank

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

The idea behind Microsoft and Nordea Bank Abp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.