Correlation Between INTUITIVE SURGICAL and Eli Lilly

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

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

Diversification Opportunities for INTUITIVE SURGICAL and Eli Lilly

-0.72

Correlation Coefficient

INTUITIVE SURGICAL  Eli Lilly

Pay attention - limited upside

The 3 months correlation between INTUITIVE and Eli is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding INTUITIVE SURGICAL and Eli Lilly and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eli Lilly and INTUITIVE SURGICAL 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 INTUITIVE SURGICAL are associated (or correlated) with Eli Lilly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eli Lilly has no effect on the direction of INTUITIVE SURGICAL i.e., INTUITIVE SURGICAL and Eli Lilly go up and down completely randomly.

Pair Corralation between INTUITIVE SURGICAL and Eli Lilly

Assuming the 90 days trading horizon INTUITIVE SURGICAL is expected to generate 0.82 times more return on investment than Eli Lilly. However, INTUITIVE SURGICAL is 1.22 times less risky than Eli Lilly. It trades about 0.15 of its potential returns per unit of risk. Eli Lilly and is currently generating about -0.07 per unit of risk. If you would invest  43,590  in INTUITIVE SURGICAL on September 4, 2024 and sell it today you would earn a total of  7,630  from holding INTUITIVE SURGICAL or generate 17.5% return on investment over 90 days.

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

INTUITIVE SURGICAL  vs.  Eli Lilly and

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.

Eli Lilly

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eli Lilly and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with INTUITIVE SURGICAL and Eli Lilly

The main advantage of trading using opposite INTUITIVE SURGICAL and Eli Lilly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTUITIVE SURGICAL position performs unexpectedly, Eli Lilly 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 Eli Lilly will offset losses from the drop in Eli Lilly's long position.

The idea behind INTUITIVE SURGICAL and Eli Lilly and 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.