Correlation Between Dentsply Sirona and ICU Medical

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

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

Diversification Opportunities for Dentsply Sirona and ICU Medical

0.23

Correlation Coefficient

Dentsply Sirona  ICU Medical

Modest diversification

The 3 months correlation between Dentsply and ICU is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and ICU Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICU Medical 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 ICU Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICU Medical has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and ICU Medical go up and down completely randomly.

Pair Corralation between Dentsply Sirona and ICU Medical

Given the investment horizon of 90 days Dentsply Sirona is expected to under-perform the ICU Medical. In addition to that, Dentsply Sirona is 2.34 times more volatile than ICU Medical. It trades about -0.07 of its total potential returns per unit of risk. ICU Medical is currently generating about -0.02 per unit of volatility. If you would invest  16,533  in ICU Medical on August 30, 2024 and sell it today you would lose (558.00) from holding ICU Medical or give up 3.38% of portfolio value over 90 days.

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

Dentsply Sirona  vs.  ICU Medical

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

ICU Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ICU Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ICU Medical is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Dentsply Sirona and ICU Medical

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

The idea behind Dentsply Sirona and ICU Medical 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.