Correlation Between Dentsply Sirona and ResMed

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

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

Diversification Opportunities for Dentsply Sirona and ResMed

-0.29

Correlation Coefficient

Dentsply Sirona  ResMed

Very good diversification

The 3 months correlation between Dentsply and ResMed is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and ResMed Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ResMed Inc 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 ResMed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ResMed Inc has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and ResMed go up and down completely randomly.

Pair Corralation between Dentsply Sirona and ResMed

Given the investment horizon of 90 days Dentsply Sirona is expected to under-perform the ResMed. But the stock apears to be less risky and, when comparing its historical volatility, Dentsply Sirona is 1.56 times less risky than ResMed. The stock trades about -0.18 of its potential returns per unit of risk. The ResMed Inc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  18,066  in ResMed Inc on January 19, 2024 and sell it today you would lose (683.00) from holding ResMed Inc or give up 3.78% of portfolio value over 90 days.

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

Dentsply Sirona  vs.  ResMed Inc

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

ResMed Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ResMed Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, ResMed is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dentsply Sirona and ResMed

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

The idea behind Dentsply Sirona and ResMed Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.