Correlation Between Dentsply Sirona and CarPartsCom

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

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

Diversification Opportunities for Dentsply Sirona and CarPartsCom

0.8

Correlation Coefficient

Dentsply Sirona  CarPartsCom

Very poor diversification

The 3 months correlation between Dentsply and CarPartsCom is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and CarPartsCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarPartsCom 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 CarPartsCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarPartsCom has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and CarPartsCom go up and down completely randomly.

Pair Corralation between Dentsply Sirona and CarPartsCom

Given the investment horizon of 90 days Dentsply Sirona is expected to generate 0.45 times more return on investment than CarPartsCom. However, Dentsply Sirona is 2.21 times less risky than CarPartsCom. It trades about -0.07 of its potential returns per unit of risk. CarPartsCom is currently generating about -0.13 per unit of risk. If you would invest  3,849  in Dentsply Sirona on March 2, 2024 and sell it today you would lose (1,074) from holding Dentsply Sirona or give up 27.9% of portfolio value over 90 days.

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

Dentsply Sirona  vs.  CarPartsCom

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 uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

CarPartsCom

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CarPartsCom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Dentsply Sirona and CarPartsCom

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

The idea behind Dentsply Sirona and CarPartsCom 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.