Correlation Between Sea and INTUITIVE SURGICAL

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

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

Diversification Opportunities for Sea and INTUITIVE SURGICAL

0.83

Correlation Coefficient

Sea  INTUITIVE SURGICAL

Very poor diversification

The 3 months correlation between Sea and INTUITIVE is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sea Limited and INTUITIVE SURGICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTUITIVE SURGICAL and Sea 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 Sea Limited 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 Sea i.e., Sea and INTUITIVE SURGICAL go up and down completely randomly.

Pair Corralation between Sea and INTUITIVE SURGICAL

Assuming the 90 days horizon Sea Limited is expected to generate 1.32 times more return on investment than INTUITIVE SURGICAL. However, Sea is 1.32 times more volatile than INTUITIVE SURGICAL. It trades about 0.29 of its potential returns per unit of risk. INTUITIVE SURGICAL is currently generating about 0.13 per unit of risk. If you would invest  7,020  in Sea Limited on September 3, 2024 and sell it today you would earn a total of  3,680  from holding Sea Limited or generate 52.42% return on investment over 90 days.

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

Sea Limited  vs.  INTUITIVE SURGICAL

Sea Limited

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sea Limited are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sea reported solid returns over the last few months and may actually be approaching a breakup point.

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. 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 Sea and INTUITIVE SURGICAL

The main advantage of trading using opposite Sea and INTUITIVE SURGICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea Limited 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.