Correlation Between Intuitive Surgical and Baxter International

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

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

Diversification Opportunities for Intuitive Surgical and Baxter International

0.64

Correlation Coefficient

Intuitive Surgical  Baxter International

Poor diversification

The 3 months correlation between Intuitive and Baxter is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Intuitive Surgical and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Intuitive Surgical i.e., Intuitive Surgical and Baxter International go up and down completely randomly.

Pair Corralation between Intuitive Surgical and Baxter International

Given the investment horizon of 90 days Intuitive Surgical is expected to under-perform the Baxter International. But the stock apears to be less risky and, when comparing its historical volatility, Intuitive Surgical is 1.13 times less risky than Baxter International. The stock trades about -0.23 of its potential returns per unit of risk. The Baxter International is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  4,201  in Baxter International on January 21, 2024 and sell it today you would lose (254.00) from holding Baxter International or give up 6.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Intuitive Surgical  vs.  Baxter International

Intuitive Surgical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intuitive Surgical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Intuitive Surgical is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Baxter International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baxter International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Baxter International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intuitive Surgical and Baxter International

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

The idea behind Intuitive Surgical and Baxter International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.