Correlation Between INTUITIVE SURGICAL and Churchill Downs

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

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

Diversification Opportunities for INTUITIVE SURGICAL and Churchill Downs

0.84

Correlation Coefficient

INTUITIVE SURGICAL  Churchill Downs

Very poor diversification

The 3 months correlation between INTUITIVE and Churchill is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding INTUITIVE SURGICAL and Churchill Downs Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Churchill Downs 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 Churchill Downs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Churchill Downs has no effect on the direction of INTUITIVE SURGICAL i.e., INTUITIVE SURGICAL and Churchill Downs go up and down completely randomly.

Pair Corralation between INTUITIVE SURGICAL and Churchill Downs

Assuming the 90 days trading horizon INTUITIVE SURGICAL is expected to generate 0.98 times more return on investment than Churchill Downs. However, INTUITIVE SURGICAL is 1.02 times less risky than Churchill Downs. It trades about 0.13 of its potential returns per unit of risk. Churchill Downs Incorporated is currently generating about 0.04 per unit of risk. If you would invest  44,535  in INTUITIVE SURGICAL on September 12, 2024 and sell it today you would earn a total of  6,245  from holding INTUITIVE SURGICAL or generate 14.02% return on investment over 90 days.

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

INTUITIVE SURGICAL  vs.  Churchill Downs Incorporated

INTUITIVE SURGICAL

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INTUITIVE SURGICAL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, INTUITIVE SURGICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Churchill Downs

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Churchill Downs Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Churchill Downs is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with INTUITIVE SURGICAL and Churchill Downs

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

The idea behind INTUITIVE SURGICAL and Churchill Downs Incorporated 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.