Correlation Between NTG Nordic and Microsoft

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

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

Diversification Opportunities for NTG Nordic and Microsoft

0.24

Correlation Coefficient

NTG Nordic  Microsoft

Modest diversification

The 3 months correlation between NTG and Microsoft is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NTG Nordic Transport and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft and NTG Nordic 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 NTG Nordic Transport are associated (or correlated) with Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of NTG Nordic i.e., NTG Nordic and Microsoft go up and down completely randomly.

Pair Corralation between NTG Nordic and Microsoft

Assuming the 90 days trading horizon NTG Nordic Transport is expected to under-perform the Microsoft. But the stock apears to be less risky and, when comparing its historical volatility, NTG Nordic Transport is 1.13 times less risky than Microsoft. The stock trades about -0.14 of its potential returns per unit of risk. The Microsoft is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  41,387  in Microsoft on December 4, 2024 and sell it today you would lose (3,862) from holding Microsoft or give up 9.33% of portfolio value over 90 days.

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

NTG Nordic Transport  vs.  Microsoft

NTG Nordic Transport

Risk-Adjusted Performance

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with NTG Nordic and Microsoft

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

The idea behind NTG Nordic Transport and Microsoft 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.