Correlation Between INTUITIVE SURGICAL and Raytheon Technologies

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

By analyzing existing cross correlation between INTUITIVE SURGICAL and Raytheon Technologies Corp, you can compare the effects of market volatilities on INTUITIVE SURGICAL and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTUITIVE SURGICAL and Raytheon Technologies.

Diversification Opportunities for INTUITIVE SURGICAL and Raytheon Technologies

0.49

Correlation Coefficient

INTUITIVE SURGICAL  Raytheon Technologies

Very weak diversification

The 3 months correlation between INTUITIVE and Raytheon is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding INTUITIVE SURGICAL and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of INTUITIVE SURGICAL i.e., INTUITIVE SURGICAL and Raytheon Technologies go up and down completely randomly.

Pair Corralation between INTUITIVE SURGICAL and Raytheon Technologies

Assuming the 90 days trading horizon INTUITIVE SURGICAL is expected to generate 1.2 times more return on investment than Raytheon Technologies. However, INTUITIVE SURGICAL is 1.2 times more volatile than Raytheon Technologies Corp. It trades about 0.15 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.05 per unit of risk. If you would invest  44,115  in INTUITIVE SURGICAL on September 16, 2024 and sell it today you would earn a total of  7,685  from holding INTUITIVE SURGICAL or generate 17.42% 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.  Raytheon Technologies Corp

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.

Raytheon Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Raytheon Technologies Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Raytheon Technologies is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INTUITIVE SURGICAL and Raytheon Technologies

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

The idea behind INTUITIVE SURGICAL and Raytheon Technologies Corp 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.