Correlation Between PSI Software and INTUITIVE SURGICAL

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

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

Diversification Opportunities for PSI Software and INTUITIVE SURGICAL

-0.69

Correlation Coefficient

PSI Software  INTUITIVE SURGICAL

Excellent diversification

The 3 months correlation between PSI and INTUITIVE is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding PSI Software AG and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL and PSI Software 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 PSI Software AG 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 PSI Software i.e., PSI Software and INTUITIVE SURGICAL go up and down completely randomly.

Pair Corralation between PSI Software and INTUITIVE SURGICAL

Assuming the 90 days trading horizon PSI Software AG is expected to under-perform the INTUITIVE SURGICAL. But the stock apears to be less risky and, when comparing its historical volatility, PSI Software AG is 1.58 times less risky than INTUITIVE SURGICAL. The stock trades about -0.07 of its potential returns per unit of risk. The INTUITIVE SURGICAL is currently generating about 0.13 of returns per unit of risk over similar time horizon. 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

PSI Software AG  vs.  INTUITIVE SURGICAL

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with PSI Software and INTUITIVE SURGICAL

The main advantage of trading using opposite PSI Software and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSI Software 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 PSI Software AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.