Correlation Between National CineMedia and Intuitive Surgical

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

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

Diversification Opportunities for National CineMedia and Intuitive Surgical

0.27

Correlation Coefficient

National CineMedia  Intuitive Surgical

Modest diversification

The 3 months correlation between National and Intuitive is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding National CineMedia and Intuitive Surgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuitive Surgical and National CineMedia 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 National CineMedia are associated (or correlated) with Intuitive Surgical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intuitive Surgical has no effect on the direction of National CineMedia i.e., National CineMedia and Intuitive Surgical go up and down completely randomly.

Pair Corralation between National CineMedia and Intuitive Surgical

Given the investment horizon of 90 days National CineMedia is expected to generate 1.05 times less return on investment than Intuitive Surgical. In addition to that, National CineMedia is 1.73 times more volatile than Intuitive Surgical. It trades about 0.05 of its total potential returns per unit of risk. Intuitive Surgical is currently generating about 0.08 per unit of volatility. If you would invest  51,555  in Intuitive Surgical on October 7, 2024 and sell it today you would earn a total of  1,974  from holding Intuitive Surgical or generate 3.83% return on investment over 90 days.

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

National CineMedia  vs.  Intuitive Surgical

National CineMedia

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Intuitive Surgical

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intuitive Surgical are ranked lower than 10 (%) 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.

Pair Trading with National CineMedia and Intuitive Surgical

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

The idea behind National CineMedia and Intuitive Surgical 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.