Correlation Between Ross Stores and INTUITIVE SURGICAL

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

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

Diversification Opportunities for Ross Stores and INTUITIVE SURGICAL

0.54

Correlation Coefficient

Ross Stores  INTUITIVE SURGICAL

Very weak diversification

The 3 months correlation between Ross and INTUITIVE is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL and Ross Stores 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 Ross Stores 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 Ross Stores i.e., Ross Stores and INTUITIVE SURGICAL go up and down completely randomly.

Pair Corralation between Ross Stores and INTUITIVE SURGICAL

Assuming the 90 days trading horizon Ross Stores is expected to generate 2.17 times less return on investment than INTUITIVE SURGICAL. In addition to that, Ross Stores is 1.03 times more volatile than INTUITIVE SURGICAL. It trades about 0.07 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 Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Ross Stores  vs.  INTUITIVE SURGICAL

Ross Stores

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ross Stores may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Ross Stores and INTUITIVE SURGICAL

The main advantage of trading using opposite Ross Stores and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores 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 Ross Stores 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.