Correlation Between NetApp and INTUITIVE SURGICAL

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

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

Diversification Opportunities for NetApp and INTUITIVE SURGICAL

0.71

Correlation Coefficient

NetApp  INTUITIVE SURGICAL

Poor diversification

The 3 months correlation between NetApp and INTUITIVE is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding NetApp Inc and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL and NetApp 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 NetApp Inc 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 NetApp i.e., NetApp and INTUITIVE SURGICAL go up and down completely randomly.

Pair Corralation between NetApp and INTUITIVE SURGICAL

Assuming the 90 days horizon NetApp is expected to generate 1.01 times less return on investment than INTUITIVE SURGICAL. In addition to that, NetApp is 1.26 times more volatile than INTUITIVE SURGICAL. It trades about 0.12 of its total potential returns per unit of risk. INTUITIVE SURGICAL is currently generating about 0.15 per unit of volatility. If you would invest  43,495  in INTUITIVE SURGICAL on September 18, 2024 and sell it today you would earn a total of  7,415  from holding INTUITIVE SURGICAL or generate 17.05% return on investment over 90 days.

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

NetApp Inc  vs.  INTUITIVE SURGICAL

NetApp Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NetApp reported solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain technical and fundamental indicators, INTUITIVE SURGICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NetApp and INTUITIVE SURGICAL

The main advantage of trading using opposite NetApp and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NetApp 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 NetApp Inc 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.