Correlation Between Microsoft and Nordic Semiconductor
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nordic Semiconductor 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 Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nordic Semiconductor ASA, you can compare the effects of market volatilities on Microsoft and Nordic Semiconductor 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 Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nordic Semiconductor.
Diversification Opportunities for Microsoft and Nordic Semiconductor
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Microsoft and Nordic is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA 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 Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of Microsoft i.e., Microsoft and Nordic Semiconductor go up and down completely randomly.
Pair Corralation between Microsoft and Nordic Semiconductor
Given the investment horizon of 90 days Microsoft is expected to generate 0.8 times more return on investment than Nordic Semiconductor. However, Microsoft is 1.24 times less risky than Nordic Semiconductor. It trades about -0.04 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about -0.22 per unit of risk. If you would invest 43,167 in Microsoft on August 31, 2024 and sell it today you would lose (821.00) from holding Microsoft or give up 1.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Nordic Semiconductor ASA
Performance |
| Timeline |
| Microsoft |
| Nordic Semiconductor ASA |
Microsoft and Nordic Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nordic Semiconductor
The main advantage of trading using opposite Microsoft and Nordic Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nordic Semiconductor 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 Semiconductor will offset losses from the drop in Nordic Semiconductor's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Nordic Semiconductor vs. NVIDIA | Nordic Semiconductor vs. Taiwan Semiconductor Manufacturing | Nordic Semiconductor vs. Intel |
Check out your portfolio center.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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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