Correlation Between Dentsply Sirona and Penn National

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

By analyzing existing cross correlation between Dentsply Sirona and Penn National Gaming, you can compare the effects of market volatilities on Dentsply Sirona and Penn National 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 Penn National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dentsply Sirona and Penn National.

Diversification Opportunities for Dentsply Sirona and Penn National

0.69

Correlation Coefficient

Dentsply Sirona  Penn National

Poor diversification

The 3 months correlation between Dentsply and Penn is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and Penn National Gaming in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penn National Gaming 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 Penn National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penn National Gaming has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and Penn National go up and down completely randomly.

Pair Corralation between Dentsply Sirona and Penn National

Given the investment horizon of 90 days Dentsply Sirona is expected to under-perform the Penn National. But the stock apears to be less risky and, when comparing its historical volatility, Dentsply Sirona is 1.77 times less risky than Penn National. The stock trades about -0.15 of its potential returns per unit of risk. The Penn National Gaming is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,779  in Penn National Gaming on January 26, 2024 and sell it today you would earn a total of  5.00  from holding Penn National Gaming or generate 0.28% return on investment over 90 days.

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

Dentsply Sirona  vs.  Penn National Gaming

Dentsply Sirona

Risk-Adjusted Performance

0 of 100

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 latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Penn National Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Penn National Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dentsply Sirona and Penn National

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

The idea behind Dentsply Sirona and Penn National Gaming 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.