Correlation Between BP Plc and INTUITIVE SURGICAL

Can any of the company-specific risk be diversified away by investing in both BP Plc 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 BP Plc and INTUITIVE SURGICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BP plc and INTUITIVE SURGICAL, you can compare the effects of market volatilities on BP Plc 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 BP Plc with a short position of INTUITIVE SURGICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and INTUITIVE SURGICAL.

Diversification Opportunities for BP Plc and INTUITIVE SURGICAL

-0.41

Correlation Coefficient

BP Plc  INTUITIVE SURGICAL

Very good diversification

The 3 months correlation between BSU and INTUITIVE is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL and BP Plc 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 BP plc 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 BP Plc i.e., BP Plc and INTUITIVE SURGICAL go up and down completely randomly.

Pair Corralation between BP Plc and INTUITIVE SURGICAL

Assuming the 90 days horizon BP Plc is expected to generate 5.9 times less return on investment than INTUITIVE SURGICAL. In addition to that, BP Plc is 1.09 times more volatile than INTUITIVE SURGICAL. It trades about 0.02 of its total potential returns per unit of risk. INTUITIVE SURGICAL is currently generating about 0.15 per unit of volatility. If you would invest  44,115  in INTUITIVE SURGICAL on September 16, 2024 and sell it today you would earn a total of  7,685  from holding INTUITIVE SURGICAL or generate 17.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BP plc  vs.  INTUITIVE SURGICAL

BP plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BP Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

INTUITIVE SURGICAL

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTUITIVE SURGICAL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, INTUITIVE SURGICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BP Plc and INTUITIVE SURGICAL

The main advantage of trading using opposite BP Plc and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc 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 BP plc 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.