Correlation Between Dentsply Sirona and TAL Education

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

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

Diversification Opportunities for Dentsply Sirona and TAL Education

-0.1

Correlation Coefficient

Dentsply Sirona  TAL Education

Good diversification

The 3 months correlation between Dentsply and TAL is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and TAL Education go up and down completely randomly.

Pair Corralation between Dentsply Sirona and TAL Education

Given the investment horizon of 90 days Dentsply Sirona is expected to under-perform the TAL Education. But the stock apears to be less risky and, when comparing its historical volatility, Dentsply Sirona is 1.74 times less risky than TAL Education. The stock trades about -0.29 of its potential returns per unit of risk. The TAL Education Group is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,213  in TAL Education Group on January 21, 2024 and sell it today you would lose (70.00) from holding TAL Education Group or give up 5.77% 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.  TAL Education Group

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 weak 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.

TAL Education Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TAL Education Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, TAL Education may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Dentsply Sirona and TAL Education

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

The idea behind Dentsply Sirona and TAL Education Group 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.