Microsoft vs Nasdaq 100 (MSFT vs QQQ) 2026: Stock Returns, Risk & Volatility

Q: Which is a better investment: MSFT or QQQ?

Over the past year, QQQ looks like the better investment: it had higher total return (QQQ +38.3% vs MSFT +6.7%) and a higher Sharpe ratio (QQQ 1.85 vs MSFT 0.22). On risk, QQQ was less volatile (QQQ 16.2% vs MSFT 24.5%), QQQ had a smaller max drawdown (QQQ -12.1% vs MSFT -34.1%), and QQQ had less severe losses on the worst 5% of days (Expected Shortfall of QQQ -2.17% vs MSFT -3.62%).

Written by Gale Finance Team

Reviewed by Sid Kalla CFA Charterholder

Quick answer

Which is a better investment: MSFT or QQQ?

Over the past year, QQQ outperformed MSFT. QQQ returned +38.3% compared with MSFT’s +6.7%. QQQ had the better risk-adjusted return, with a Sharpe ratio of 1.85 versus MSFT’s 0.22. QQQ was less volatile than MSFT, and QQQ had a smaller max drawdown than MSFT.

Total Return

MSFT +6.7%

QQQ +38.3%

Sharpe Ratio

MSFT 0.22

QQQ 1.85

Annualized Volatility

MSFT 24.5%

QQQ 16.2%

Max Drawdown

MSFT -34.1%

QQQ -12.1%

Metric winners: Total Return: QQQ; Sharpe Ratio: QQQ; Annualized Volatility: QQQ (less volatile); Max Drawdown: QQQ (smaller drawdown).

MSFT Total Return

↑ +6.7%

QQQ Total Return

↑ +38.3%

Relative Performance of MSFT vs QQQ (Normalized to 100)

MSFT QQQ

Normalized to 100 at start date for comparison

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Key Takeaways

Total Return: MSFT delivered a +6.7% total return, while QQQ returned +38.3% over the same period. QQQ outperformed on total returns.
Risk-Adjusted Return (Sharpe Ratio): QQQ had a higher Sharpe (1.85 vs 0.22), indicating better risk-adjusted performance.
Volatility (Annualized): MSFT was more volatile, with 24.5% annualized volatility, versus 16.2% for QQQ.
Maximum Drawdown: QQQ's maximum drawdown was -12.1%, while MSFT experienced a deeper drawdown of -34.1%.
Tail Risk (VaR & Expected Shortfall): At the 5% level (daily log returns), MSFT's VaR was -2.43% and its Expected Shortfall (CVaR) was -3.62%; QQQ's were -1.87% and -2.17%. VaR is the cutoff; Expected Shortfall is the average move on the worst days.
Skew & Kurtosis: Skew: MSFT -0.92 vs QQQ -0.09. Excess kurtosis: MSFT 10.01 vs QQQ 1.33. Negative skew leans downside; higher excess kurtosis means fatter tails.
Tail Days & Extremes: 2σ tail days (down/up): MSFT 4/5, QQQ 10/6. Worst day: MSFT -9.99% (2026-01-29) vs QQQ -3.47% (2025-10-10). Best day: MSFT +7.63% (2025-05-01) vs QQQ +4.07% (2025-05-12).
Risk ratios: Sortino - MSFT: 0.30 vs. QQQ: 2.80 , Calmar - MSFT: 0.20 vs. QQQ: 3.20 , Sterling - MSFT: 0.07 vs. QQQ: 2.85 , Treynor - MSFT: 0.06 vs. QQQ: 0.24 , Ulcer Index - MSFT: 14.27% vs. QQQ: 3.14%

Investment Comparison

If you invested $10,000 in each asset on April 25, 2025:

MSFT $10,667.11 +6.7%

QQQ $13,833.86 +38.3%

Difference: $3,166.75 (QQQ ahead)

Microsoft vs Nasdaq 100 Performance Over Time

Metric	MSFT	QQQ
30 Days	11.5%	11.5%
90 Days	-10.8%	4.6%
180 Days	-20.4%	5.7%
1 Year	6.7%	38.3%

Shorter time frames can show different leaders as market conditions change. Consider your investment horizon when comparing performance.

Microsoft vs Nasdaq 100 Correlation

Average Correlation

moderately correlated

0.53

Current (30-day) 0.67

30-day rolling range +0.28 to +0.78

Microsoft and Nasdaq 100 are moderately correlated over the past year. With a correlation of 0.53, these assets show moderate co-movement, offering some diversification when held together.

For portfolio construction, this moderate correlation offers some diversification benefit, though the assets still tend to move together during major market moves.

Metric	Value
Current (30-day)	0.67
Average (full period)	0.53
Minimum (30-day rolling)	0.28
Maximum (30-day rolling)	0.78

Correlation measures how closely two assets move together. Values near +1 indicate strong co-movement, near 0 indicates independence, and negative values indicate inverse movement. Current, minimum, and maximum figures are 30-day rolling correlations on shared daily returns.

Drawdown

Maximum Drawdown

MSFT

-34.1%

QQQ

-12.1%

Microsoft experienced its maximum drawdown of -34.1% from 2025-10-28 to 2026-03-27. It has not yet recovered to its previous peak.

Nasdaq 100 experienced its maximum drawdown of -12.1% from 2025-10-29 to 2026-03-30. It took 16 days to recover.

Smaller drawdowns and faster recoveries indicate lower downside risk and greater resilience during market stress.

Microsoft vs Nasdaq 100 Volatility (MSFT vs QQQ)

MSFT Volatility

24.5%

±1.54% 1-day vol

QQQ Volatility

16.2%

±1.02% 1-day vol

1-day volatility (1σ)

MSFT

±1.54%

QQQ

±1.02%

Microsoft's 24.5% annualized volatility translates to about ±1.54% one-standard-deviation daily volatility.

Nasdaq 100's 16.2% annualized volatility translates to about ±1.02% one-standard-deviation daily volatility.

MSFT had the wider volatility profile over this window. That means its day-to-day return distribution was broader; QQQ was calmer, but lower volatility does not by itself mean better returns.

Treat the ± daily figure as a one-standard-deviation estimate from historical returns, not a forecast or expected absolute daily move. For context, 15-18% annualized volatility is roughly ±1% one-standard-deviation daily volatility.

Risk-adjusted ratios

Sharpe Ratio of MSFT and QQQ

Sharpe Ratio: MSFT vs. QQQ

Return per total volatility

Sharpe gives us excess return per unit of risk. Upside and downside volatility both count as risk.

Higher is better

excess return / total volatility

Formula

\displaystyle \mathrm{Sharpe} = \frac{\mathbb{E}[R] - R_f}{\sigma_R}

Sharpe ratio measures return per unit of risk (volatility). A higher Sharpe indicates better risk-adjusted performance. QQQ had a higher Sharpe (1.85 vs 0.22), indicating better risk-adjusted performance.

A Sharpe above 1.0 is generally considered good, above 2.0 is excellent. Negative Sharpe means the asset underperformed the risk-free rate. Calculated on each asset's full 365-day lookback of available prices and annualized using the asset calendar (365 for crypto, 252 trading days for equities/ETFs/metals).

Sortino Ratio of MSFT and QQQ

Sortino Ratio: MSFT vs. QQQ

Return per downside volatility

Sortino keeps the return-over-risk idea, but only returns below the target rate count as volatility.

Higher is better

excess return / downside volatility

Formula

\displaystyle \mathrm{Sortino} = \frac{\mathbb{E}[R] - R_f}{\sigma_{\mathrm{down}}}

Sortino ratio measures return per unit of downside risk. Unlike Sharpe, it only counts downside deviation (returns below the target return). QQQ had better downside-adjusted returns.

A higher Sortino is better. It's useful when upside volatility is common (crypto is the obvious example). Downside deviation: MSFT 17.8% vs QQQ 10.7%. Calculated on each asset's full 365-day lookback of available prices, using the daily risk-free rate as the target return, and annualized using the asset calendar (365 for crypto, 252 trading days for equities/ETFs/metals).

Calmar Ratio of MSFT and QQQ

Calmar Ratio: MSFT vs. QQQ

CAGR per worst drawdown

Calmar compares CAGR against the single deepest peak-to-trough loss over the period.

Higher is better

CAGR / max drawdown

Formula

\displaystyle \mathrm{Calmar} = \frac{\mathrm{CAGR}}{|\mathrm{MaxDD}|}

Calmar ratio compares CAGR to maximum drawdown. Higher Calmar means more return per unit of worst drawdown. QQQ posted the higher Calmar ratio.

Calmar is computed on each asset's full 365-day lookback and uses the max drawdown over that same window.

Sterling Ratio of MSFT and QQQ

Sterling Ratio: MSFT vs. QQQ

Return per average drawdown

Sterling smooths the drawdown penalty by using average drawdown events instead of only the worst one.

Higher is better

excess annual return / average deep drawdown

Formula

\displaystyle \mathrm{Sterling} = \frac{\mathrm{CAGR} - R_f}{\overline{D}_{>10\%}}

Sterling ratio measures excess return per unit of average drawdown (typically drawdowns worse than 10%). QQQ posted the higher Sterling ratio.

Sterling uses average drawdown events deeper than 10% and subtracts the risk-free rate to report excess return.

Treynor Ratio of MSFT and QQQ

Treynor Ratio: MSFT vs. QQQ

Excess return per market beta

Treynor divides excess annualized return by beta — the sensitivity of the asset to broad-market moves. The slope shown is each asset’s beta vs SPY.

Higher is better

excess return / market beta

Formula

\displaystyle \mathrm{Treynor} = \frac{\mathbb{E}[R] - R_f}{\beta}

Treynor ratio measures excess return per unit of market risk (beta) instead of total volatility. QQQ posted the higher Treynor ratio.

Treynor uses beta vs the S&P 500 (SPY) on shared dates and the average 3-month Treasury rate as the risk-free rate.

Ulcer Index of MSFT and QQQ

Ulcer Index: MSFT vs. QQQ

Drawdown pain

Ulcer Index is a risk index, not a return-over-risk ratio. Lower means smaller and shorter drawdowns.

Lower is better

root-mean-square drawdown

Formula

\displaystyle \mathrm{UI} = \sqrt{\mathbb{E}[D_t^2]}

Ulcer Index captures drawdown depth and duration. Lower Ulcer Index means less drawdown pain. QQQ had the lower Ulcer Index (less drawdown pain).

Ulcer Index is computed from each asset's drawdown series over the full lookback window.

Tail Risk & Distribution Shape (1-Year): Microsoft vs. Nasdaq 100

This section looks at the shape of daily returns, not just the average. Tail stats are computed per asset on its own daily series (crypto includes weekends). We use daily log returns $\ln\left(\frac{P_t}{P_{t-1}}\right)$ so multi-day moves add cleanly.

Definitions: Value at Risk (VaR), Expected Shortfall, skew, kurtosis, and fat tails.

Tail Risk & Distribution Shape: MSFT vs. QQQ (1-Year)

Actual daily return tails

The bars are real daily log-return observations from the article window. Darker bars are observations at or beyond each asset’s 5% VaR cutoff.

Observed returns

VaR marks the 5th percentile loss cutoff; Expected Shortfall averages the observations beyond that cutoff.

Formula

\displaystyle \mathrm{VaR}_{5\%}=Q_{0.05}(r_t),\quad \mathrm{ES}_{5\%}=\mathbb{E}[r_t\mid r_t\le \mathrm{VaR}_{5\%}]

Metric (1-Year)	MSFT	QQQ
5% VaR (daily log return)	-2.43%	-1.87%
5% Expected Shortfall (CVaR)	-3.62% (worst 13 days)	-2.17% (worst 13 days)
Skew	-0.92	-0.09
Excess kurtosis	10.01	1.33
2σ tail days (down / up)	4 / 5	10 / 6
Worst day	-9.99% (2026-01-29)	-3.47% (2025-10-10)
Best day	+7.63% (2025-05-01)	+4.07% (2025-05-12)

Downside co-moves (2σ) — 1-Year

Computed on shared dates only (n=249). A “2σ downside move” means a shared-close log return more than 2 standard deviations below that asset’s own mean on this shared-date series. Dates below show simple returns (%) for readability.

Downside co-move map: MSFT vs. QQQ (2σ)

Shared-close daily returns

Dots mark actual downside days: asset-colored dots are one-sided downside moves, and red dots are joint downside days. Grey dots add sampled shared-return context when available. The shaded lower-left zone shows where both MSFT and QQQ crossed their own 2σ downside threshold.

2σ

Show downside tail dates

Dates below are shared-date observations. The “Date” is the period end (close). Tail thresholds are computed on log returns, but the table shows simple returns (%) for readability. Returns are computed from the previous shared close to this one (for example, Friday → Monday includes weekend moves).

Days when both MSFT and QQQ had a big down day (2σ)

None in this window.

Days when MSFT had a big down day

Date (interval)	MSFT	QQQ
2026-01-29	-9.99%	-0.60%
2026-02-05	-4.95%	-1.44%
2026-02-20 → 2026-02-23	-3.21%	-1.22%
2026-04-23	-3.97%	-0.56%

Days when QQQ had a big down day

Date (interval)	MSFT	QQQ
2025-08-01	-1.76%	-1.97%
2025-10-10	-2.19%	-3.47%
2025-11-04	-0.52%	-2.03%
2025-11-13	-1.54%	-2.04%
2025-11-20	-1.60%	-2.37%
2025-12-12	-1.02%	-1.91%
2026-01-16 → 2026-01-20	-1.16%	-2.12%
2026-02-12	-0.63%	-2.03%
2026-03-26	-1.37%	-2.39%
2026-03-27	-2.51%	-1.95%

Read this as “how ugly the ugly days get”, not as a precise forecast. One-year samples are small, so tail estimates are inherently noisy.

Full Comparison of Microsoft vs. Nasdaq 100 (1-Year)

Metric	MSFT	QQQ
Total Return	+6.7%	+38.3%
Annualized Volatility	24.5%	16.2%
Sharpe Ratio	0.22	1.85
Sortino Ratio	0.30	2.80
Calmar Ratio	0.20	3.20
Sterling Ratio	0.07	2.85
Treynor Ratio	0.06	0.24
Ulcer Index	14.27%	3.14%
Max Drawdown	-34.1%	-12.1%
Avg Correlation to S&P 500	0.47	0.95
5% VaR (daily log return)	-2.43%	-1.87%
5% Expected Shortfall (CVaR)	-3.62%	-2.17%
Skew	-0.92	-0.09
Excess kurtosis	10.01	1.33
2σ tail days (down / up)	4 / 5	10 / 6

Audit this calculation

Formulas, inputs, and conventions used to compute the metrics on this page.

Inputs & conventions

Shared window for pair metrics: 2025-04-25 → 2026-04-23 (last shared close).
Rolling correlation sample (shared closes): 220 rolling 30-day values (from 249 shared daily returns).
Annualization (days/year): MSFT: 252 days/year; QQQ: 252 days/year.
Risk-free rate: Uses the 3-month U.S. Treasury yield (FRED: DGS3MO), averaged over each asset’s window:

MSFT: 4.17% over 2025-04-25 → 2026-04-23.

QQQ: 4.17% over 2025-04-25 → 2026-04-23.
Volatility drag (rule of thumb): Estimated from annualized volatility (simple returns). For the log-return framing, see Log returns.

MSFT: ≈ -3.0%/yr

QQQ: ≈ -1.3%/yr
Data alignment: No forward fill. Correlation and tail co-moves are computed on shared closes only.
For cross-calendar pairs (e.g., crypto vs stocks), weekend/holiday moves roll into the next shared close.
Return conventions: Volatility/Sharpe/Sortino use simple daily returns. Tail-risk uses daily log returns for distribution stats (but tables show simple returns). Log returns.

Formulas

Daily simple return

r_t = \frac{P_t}{P_{t-1}} - 1

Volatility

\sigma_{ann} = \sigma(r_t)\sqrt{A}

Volatility drag (approx.)

\text{drag} \approx \tfrac{1}{2}\sigma_{ann}^2

Sharpe Ratio

S = \frac{A\,\bar{r} - r_f}{\sigma(r_t)\sqrt{A}}

Sortino Ratio

So = \frac{A\,\bar{r} - r_f}{\sqrt{\mathbb{E}[\min(0,\,r_t - r_f/A)^2]}\,\sqrt{A}}

Maximum Drawdown

MDD = \min_t\left(\frac{P_t}{\max_{s \le t} P_s} - 1\right)

Average Correlation

\rho = \frac{\operatorname{cov}(r^A,\,r^B)}{\sigma_A\,\sigma_B}

Log returns

\ell_t = \ln\left(\frac{P_t}{P_{t-1}}\right)

Notation

$P_t$: Price on day t.
$r_t$: Simple daily return.
$\ell_t$: Log daily return.
$\bar{r}$: Average daily return.
$\sigma(r_t)$: Standard deviation of daily returns.
$A$: Annualization factor (days/year).
$r_f$: Annual risk-free rate.

Microsoft vs Nasdaq 100: Frequently Asked Questions

Which has higher volatility: MSFT or QQQ?

MSFT showed higher volatility at 24.5% annualized, compared to 16.2% for QQQ Over the past year. Higher volatility means larger price swings in both directions.

Does MSFT provide diversification when held with QQQ?

MSFT and QQQ are moderately correlated over the past year, with an average correlation of 0.53. This offers some diversification benefit, though they still tend to move together during major market moves.

How bad are the worst 5% days for MSFT vs QQQ?

Over the past year, MSFT's 5% VaR was -2.43% and its 5% Expected Shortfall was -3.62% (worst 13 days). QQQ's were -1.87% and -2.17% (worst 13 days).

Do MSFT and QQQ crash together on bad days?

On shared dates (n=249), when QQQ has a 2σ down day, MSFT also does 0.0% (0/10 days). In the other direction, when MSFT has one, QQQ also does 0.0% (0/4 days).

Which has better risk-adjusted returns: MSFT or QQQ?

QQQ showed better risk-adjusted performance with a Sharpe ratio of 1.85 versus MSFT's 0.22 Over the past year.

Can MSFT and QQQ be combined in a portfolio?

Yes, though allocation sizing matters. Their moderate correlation offers some diversification benefits. MSFT's higher volatility (24.5%) means even small allocations can materially impact overall portfolio risk.

Explore our financial glossary

Which is a better investment: MSFT or QQQ?

Share This Comparison of MSFT vs QQQ

Relative Performance of MSFT vs QQQ (Normalized to 100)

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Key Takeaways

Investment Comparison

Microsoft vs Nasdaq 100 Performance Over Time

Microsoft vs Nasdaq 100 Correlation

Drawdown

Microsoft vs Nasdaq 100 Volatility (MSFT vs QQQ)

Risk-adjusted ratios

Sharpe Ratio of MSFT and QQQ

Sharpe Ratio: MSFT vs. QQQ

Sortino Ratio of MSFT and QQQ

Sortino Ratio: MSFT vs. QQQ

Calmar Ratio of MSFT and QQQ

Calmar Ratio: MSFT vs. QQQ

Sterling Ratio of MSFT and QQQ

Sterling Ratio: MSFT vs. QQQ

Treynor Ratio of MSFT and QQQ

Treynor Ratio: MSFT vs. QQQ

Ulcer Index of MSFT and QQQ

Ulcer Index: MSFT vs. QQQ

Tail Risk & Distribution Shape (1-Year): Microsoft vs. Nasdaq 100

Tail Risk & Distribution Shape: MSFT vs. QQQ (1-Year)

Downside co-moves (2σ) — 1-Year

Downside co-move map: MSFT vs. QQQ (2σ)

Days when both MSFT and QQQ had a big down day (2σ)

Days when MSFT had a big down day

Days when QQQ had a big down day

Full Comparison of Microsoft vs. Nasdaq 100 (1-Year)

Inputs & conventions

Formulas

Microsoft vs Nasdaq 100: Frequently Asked Questions

Which has higher volatility: MSFT or QQQ?

Does MSFT provide diversification when held with QQQ?

How bad are the worst 5% days for MSFT vs QQQ?

Do MSFT and QQQ crash together on bad days?

Which has better risk-adjusted returns: MSFT or QQQ?

Can MSFT and QQQ be combined in a portfolio?