Correlation Between CVS Health and Intuitive Surgical

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

By analyzing existing cross correlation between CVS Health Corp and Intuitive Surgical, you can compare the effects of market volatilities on CVS Health 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 CVS Health with a short position of Intuitive Surgical. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Intuitive Surgical.

Diversification Opportunities for CVS Health and Intuitive Surgical

-0.44

Correlation Coefficient

CVS Health  Intuitive Surgical

Very good diversification

The 3 months correlation between CVS and Intuitive is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Intuitive Surgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuitive Surgical and CVS Health 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 CVS Health Corp 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 CVS Health i.e., CVS Health and Intuitive Surgical go up and down completely randomly.

Pair Corralation between CVS Health and Intuitive Surgical

Considering the 90-day investment horizon CVS Health is expected to generate 1.54 times less return on investment than Intuitive Surgical. In addition to that, CVS Health is 1.53 times more volatile than Intuitive Surgical. It trades about 0.05 of its total potential returns per unit of risk. Intuitive Surgical is currently generating about 0.11 per unit of volatility. If you would invest  48,344  in Intuitive Surgical on August 31, 2024 and sell it today you would earn a total of  5,511  from holding Intuitive Surgical or generate 11.4% return on investment over 90 days.

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

CVS Health Corp  vs.  Intuitive Surgical

CVS Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Intuitive Surgical

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intuitive Surgical are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Intuitive Surgical may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CVS Health and Intuitive Surgical

The main advantage of trading using opposite CVS Health and Intuitive Surgical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health 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 CVS Health Corp 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.