Correlation Between Intuitive Surgical and Shoprite Holdings

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

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

Diversification Opportunities for Intuitive Surgical and Shoprite Holdings

0.36

Correlation Coefficient

Intuitive Surgical  Shoprite Holdings

Weak diversification

The 3 months correlation between Intuitive and Shoprite is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Intuitive Surgical and Shoprite Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shoprite 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 Shoprite Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shoprite Holdings has no effect on the direction of Intuitive Surgical i.e., Intuitive Surgical and Shoprite Holdings go up and down completely randomly.

Pair Corralation between Intuitive Surgical and Shoprite Holdings

Given the investment horizon of 90 days Intuitive Surgical is expected to generate 0.55 times more return on investment than Shoprite Holdings. However, Intuitive Surgical is 1.83 times less risky than Shoprite Holdings. It trades about 0.11 of its potential returns per unit of risk. Shoprite Holdings Limited is currently generating about 0.04 per unit of risk. If you would invest  24,569  in Intuitive Surgical on October 22, 2024 and sell it today you would earn a total of  34,695  from holding Intuitive Surgical or generate 141.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.27%
Values	Daily Returns

Intuitive Surgical  vs.  Shoprite Holdings Limited

Intuitive Surgical

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intuitive Surgical are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Intuitive Surgical reported solid returns over the last few months and may actually be approaching a breakup point.

Shoprite Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Intuitive Surgical and Shoprite Holdings

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

The idea behind Intuitive Surgical and Shoprite Holdings Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.