Correlation Between Microsoft and INTUITIVE SURGICAL
Can any of the company-specific risk be diversified away by investing in both Microsoft and INTUITIVE SURGICAL 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 INTUITIVE SURGICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and INTUITIVE SURGICAL, you can compare the effects of market volatilities on Microsoft and INTUITIVE SURGICAL 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 INTUITIVE SURGICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and INTUITIVE SURGICAL.
Diversification Opportunities for Microsoft and INTUITIVE SURGICAL
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Microsoft and INTUITIVE is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL 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 INTUITIVE SURGICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTUITIVE SURGICAL has no effect on the direction of Microsoft i.e., Microsoft and INTUITIVE SURGICAL go up and down completely randomly.
Pair Corralation between Microsoft and INTUITIVE SURGICAL
Assuming the 90 days trading horizon Microsoft is expected to generate 1.56 times less return on investment than INTUITIVE SURGICAL. But when comparing it to its historical volatility, Microsoft is 1.27 times less risky than INTUITIVE SURGICAL. It trades about 0.09 of its potential returns per unit of risk. INTUITIVE SURGICAL is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 23,650 in INTUITIVE SURGICAL on August 27, 2024 and sell it today you would earn a total of 29,730 from holding INTUITIVE SURGICAL or generate 125.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. INTUITIVE SURGICAL
Performance |
| Timeline |
| Microsoft |
| INTUITIVE SURGICAL |
Microsoft and INTUITIVE SURGICAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and INTUITIVE SURGICAL
The main advantage of trading using opposite Microsoft and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, INTUITIVE SURGICAL 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 INTUITIVE SURGICAL will offset losses from the drop in INTUITIVE SURGICAL's long position.| Microsoft vs. United Airlines Holdings | Microsoft vs. JAPAN AIRLINES | Microsoft vs. G III APPAREL GROUP | Microsoft vs. LIFENET INSURANCE CO |
| INTUITIVE SURGICAL vs. PENN NATL GAMING | INTUITIVE SURGICAL vs. GAMING FAC SA | INTUITIVE SURGICAL vs. Xinhua Winshare Publishing | INTUITIVE SURGICAL vs. TSOGO SUN GAMING |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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