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

0.62

Correlation Coefficient

Microsoft  Intuitive Surgical

Poor diversification

The 3 months correlation between Microsoft and Intuitive is 0.62. 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

Given the investment horizon of 90 days Microsoft is expected to generate 0.82 times more return on investment than Intuitive Surgical. However, Microsoft is 1.22 times less risky than Intuitive Surgical. It trades about -0.03 of its potential returns per unit of risk. Intuitive Surgical is currently generating about -0.04 per unit of risk. If you would invest  40,748  in Microsoft on January 28, 2024 and sell it today you would lose (844.00) from holding Microsoft or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.73%
Values	Daily Returns

Microsoft  vs.  Intuitive Surgical

Microsoft

Risk-Adjusted Performance

0 of 100

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 comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Intuitive Surgical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intuitive Surgical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Intuitive Surgical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

The idea behind Microsoft and Intuitive Surgical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.