Correlation Between INTUITIVE SURGICAL and NMI Holdings

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

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

Diversification Opportunities for INTUITIVE SURGICAL and NMI Holdings

0.62

Correlation Coefficient

INTUITIVE SURGICAL  NMI Holdings

Poor diversification

The 3 months correlation between INTUITIVE and NMI is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding INTUITIVE SURGICAL and NMI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NMI Holdings 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 NMI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NMI Holdings has no effect on the direction of INTUITIVE SURGICAL i.e., INTUITIVE SURGICAL and NMI Holdings go up and down completely randomly.

Pair Corralation between INTUITIVE SURGICAL and NMI Holdings

Assuming the 90 days trading horizon INTUITIVE SURGICAL is expected to generate 1.2 times more return on investment than NMI Holdings. However, INTUITIVE SURGICAL is 1.2 times more volatile than NMI Holdings. It trades about 0.09 of its potential returns per unit of risk. NMI Holdings is currently generating about 0.08 per unit of risk. If you would invest  19,138  in INTUITIVE SURGICAL on June 23, 2024 and sell it today you would earn a total of  24,622  from holding INTUITIVE SURGICAL or generate 128.66% return on investment over 90 days.

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

INTUITIVE SURGICAL  vs.  NMI Holdings

INTUITIVE SURGICAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in INTUITIVE SURGICAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, INTUITIVE SURGICAL may actually be approaching a critical reversion point that can send shares even higher in October 2024.

NMI Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NMI Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NMI Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTUITIVE SURGICAL and NMI Holdings

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

The idea behind INTUITIVE SURGICAL and NMI Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.