Correlation Between Microsoft and Nel ASA
Can any of the company-specific risk be diversified away by investing in both Microsoft and Nel ASA 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 Nel ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Nel ASA, you can compare the effects of market volatilities on Microsoft and Nel ASA 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 Nel ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Nel ASA.
Diversification Opportunities for Microsoft and Nel ASA
Good diversification
The 3 months correlation between Microsoft and Nel is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Nel ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nel 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 Nel ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nel ASA has no effect on the direction of Microsoft i.e., Microsoft and Nel ASA go up and down completely randomly.
Pair Corralation between Microsoft and Nel ASA
Given the investment horizon of 90 days Microsoft is expected to generate 0.34 times more return on investment than Nel ASA. However, Microsoft is 2.94 times less risky than Nel ASA. It trades about 0.09 of its potential returns per unit of risk. Nel ASA is currently generating about -0.08 per unit of risk. If you would invest 25,418 in Microsoft on October 25, 2024 and sell it today you would earn a total of 19,202 from holding Microsoft or generate 75.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Nel ASA
Performance |
| Timeline |
| Microsoft |
| Nel ASA |
Microsoft and Nel ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Nel ASA
The main advantage of trading using opposite Microsoft and Nel ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Nel ASA 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 Nel ASA will offset losses from the drop in Nel ASA's long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. BLOCK INC | Microsoft vs. Adobe Systems Incorporated |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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