Correlation Between Microsoft and Nordic Technology

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

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

Diversification Opportunities for Microsoft and Nordic Technology

-0.08

Correlation Coefficient

Microsoft  Nordic Technology

Good diversification

The 3 months correlation between Microsoft and Nordic is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nordic Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Technology 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 Nordic Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Technology has no effect on the direction of Microsoft i.e., Microsoft and Nordic Technology go up and down completely randomly.

Pair Corralation between Microsoft and Nordic Technology

Given the investment horizon of 90 days Microsoft is expected to under-perform the Nordic Technology. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 8.94 times less risky than Nordic Technology. The stock trades about -0.11 of its potential returns per unit of risk. The Nordic Technology Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  190.00  in Nordic Technology Group on December 30, 2024 and sell it today you would lose (21.00) from holding Nordic Technology Group or give up 11.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Microsoft  vs.  Nordic Technology Group

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 latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nordic Technology

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Technology Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Nordic Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and Nordic Technology

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

The idea behind Microsoft and Nordic Technology Group 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.