Correlation Between Volkswagen and INTUITIVE SURGICAL

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

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

Diversification Opportunities for Volkswagen and INTUITIVE SURGICAL

-0.9

Correlation Coefficient

Volkswagen  INTUITIVE SURGICAL

Pay attention - limited upside

The 3 months correlation between Volkswagen and INTUITIVE is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL and Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and INTUITIVE SURGICAL go up and down completely randomly.

Pair Corralation between Volkswagen and INTUITIVE SURGICAL

Assuming the 90 days trading horizon Volkswagen AG is expected to under-perform the INTUITIVE SURGICAL. But the stock apears to be less risky and, when comparing its historical volatility, Volkswagen AG is 1.05 times less risky than INTUITIVE SURGICAL. The stock trades about -0.16 of its potential returns per unit of risk. The INTUITIVE SURGICAL is currently generating about 0.15 of returns per unit of risk over similar time horizon. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Volkswagen AG  vs.  INTUITIVE SURGICAL

Volkswagen AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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 Volkswagen and INTUITIVE SURGICAL

The main advantage of trading using opposite Volkswagen and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.