Correlation Between Dentsply Sirona and Edwards Lifesciences

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Can any of the company-specific risk be diversified away by investing in both Dentsply Sirona and Edwards Lifesciences 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 Dentsply Sirona and Edwards Lifesciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dentsply Sirona and Edwards Lifesciences Corp, you can compare the effects of market volatilities on Dentsply Sirona and Edwards Lifesciences 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 Dentsply Sirona with a short position of Edwards Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsply Sirona and Edwards Lifesciences.

Diversification Opportunities for Dentsply Sirona and Edwards Lifesciences

-0.84
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Dentsply and Edwards is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and Edwards Lifesciences Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edwards Lifesciences Corp and Dentsply Sirona 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 Dentsply Sirona are associated (or correlated) with Edwards Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edwards Lifesciences Corp has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and Edwards Lifesciences go up and down completely randomly.

Pair Corralation between Dentsply Sirona and Edwards Lifesciences

Given the investment horizon of 90 days Dentsply Sirona is expected to under-perform the Edwards Lifesciences. But the stock apears to be less risky and, when comparing its historical volatility, Dentsply Sirona is 1.03 times less risky than Edwards Lifesciences. The stock trades about -0.02 of its potential returns per unit of risk. The Edwards Lifesciences Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  12,150  in Edwards Lifesciences Corp on December 30, 2023 and sell it today you would lose (2,594) from holding Edwards Lifesciences Corp or give up 21.35% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dentsply Sirona  vs.  Edwards Lifesciences Corp

 Performance 
       Timeline  
Dentsply Sirona 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Dentsply Sirona has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Dentsply Sirona is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Edwards Lifesciences Corp 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Edwards Lifesciences Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Edwards Lifesciences showed solid returns over the last few months and may actually be approaching a breakup point.

Dentsply Sirona and Edwards Lifesciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dentsply Sirona and Edwards Lifesciences

The main advantage of trading using opposite Dentsply Sirona and Edwards Lifesciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dentsply Sirona position performs unexpectedly, Edwards Lifesciences 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 Edwards Lifesciences will offset losses from the drop in Edwards Lifesciences' long position.
The idea behind Dentsply Sirona and Edwards Lifesciences Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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