Correlation Between Intuitive Surgical and Lincoln Electric

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

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

Diversification Opportunities for Intuitive Surgical and Lincoln Electric

0.51

Correlation Coefficient

Intuitive Surgical  Lincoln Electric

Very weak diversification

The 3 months correlation between Intuitive and Lincoln is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Intuitive Surgical and Lincoln Electric Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Electric Holdings 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 Lincoln Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Electric Holdings has no effect on the direction of Intuitive Surgical i.e., Intuitive Surgical and Lincoln Electric go up and down completely randomly.

Pair Corralation between Intuitive Surgical and Lincoln Electric

Given the investment horizon of 90 days Intuitive Surgical is expected to under-perform the Lincoln Electric. In addition to that, Intuitive Surgical is 1.08 times more volatile than Lincoln Electric Holdings. It trades about -0.04 of its total potential returns per unit of risk. Lincoln Electric Holdings is currently generating about 0.03 per unit of volatility. If you would invest  18,899  in Lincoln Electric Holdings on December 20, 2024 and sell it today you would earn a total of  508.00  from holding Lincoln Electric Holdings or generate 2.69% return on investment over 90 days.

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

Intuitive Surgical  vs.  Lincoln Electric Holdings

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.

Lincoln Electric Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Electric Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Lincoln Electric is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Intuitive Surgical and Lincoln Electric

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

The idea behind Intuitive Surgical and Lincoln Electric Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.