Correlation Between Intuitive Surgical and Douglas Emmett

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

By analyzing existing cross correlation between Intuitive Surgical and Douglas Emmett, you can compare the effects of market volatilities on Intuitive Surgical and Douglas Emmett 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 Douglas Emmett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intuitive Surgical and Douglas Emmett.

Diversification Opportunities for Intuitive Surgical and Douglas Emmett

0.06

Correlation Coefficient

Intuitive Surgical  Douglas Emmett

Significant diversification

The 3 months correlation between Intuitive and Douglas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Intuitive Surgical and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett 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 Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of Intuitive Surgical i.e., Intuitive Surgical and Douglas Emmett go up and down completely randomly.

Pair Corralation between Intuitive Surgical and Douglas Emmett

Given the investment horizon of 90 days Intuitive Surgical is expected to generate 0.98 times more return on investment than Douglas Emmett. However, Intuitive Surgical is 1.02 times less risky than Douglas Emmett. It trades about -0.04 of its potential returns per unit of risk. Douglas Emmett is currently generating about -0.07 per unit of risk. If you would invest  52,443  in Intuitive Surgical on December 20, 2024 and sell it today you would lose (3,237) from holding Intuitive Surgical or give up 6.17% of portfolio value over 90 days.

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

Intuitive Surgical  vs.  Douglas Emmett

Intuitive Surgical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intuitive Surgical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Intuitive Surgical is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Intuitive Surgical and Douglas Emmett

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

The idea behind Intuitive Surgical and Douglas Emmett 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.