Correlation Between Dentsply Sirona and British American

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

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

Diversification Opportunities for Dentsply Sirona and British American

-0.71

Correlation Coefficient

Dentsply Sirona  British American

Pay attention - limited upside

The 3 months correlation between Dentsply and British is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Dentsply Sirona and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Dentsply Sirona i.e., Dentsply Sirona and British American go up and down completely randomly.

Pair Corralation between Dentsply Sirona and British American

Assuming the 90 days trading horizon Dentsply Sirona is expected to generate 1.05 times less return on investment than British American. In addition to that, Dentsply Sirona is 1.41 times more volatile than British American Tobacco. It trades about 0.08 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.12 per unit of volatility. If you would invest  3,630  in British American Tobacco on October 26, 2024 and sell it today you would earn a total of  78.00  from holding British American Tobacco or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.47%
Values	Daily Returns

Dentsply Sirona  vs.  British American Tobacco

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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

British American Tobacco

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in British American Tobacco are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, British American may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dentsply Sirona and British American

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

The idea behind Dentsply Sirona and British American Tobacco 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.